Rise in UI Claims Tells Half of the Story
Daniel Zhao
Chief Economist at Glassdoor | Jul 30, 2020
By Daniel Zhao
Unemployment insurance (UI) claims rose on a seasonally adjusted basis, but the seasonal adjustment obscures the underlying trend seen in the non-seasonally adjusted data: The slight decrease in claims is a positive sign that the economic recovery may be resuming after stalling out in early July.
Initial UI claims rose for the second consecutive week, on a seasonally adjusted basis, increasing to 1.43 million from 1.42 million, according to the latest figures from the Department of Labor for the week ending July 25. This mirrors a similar increase last week, which broke the streak of 15 weeks of consecutive declines. However, non-seasonally adjusted initial claims continued to decline, dropping to 1.21 million, their lowest level since the crisis began and the fastest rate of improvement since May.
The increase in seasonally adjusted initial claims over the last two weeks is entirely attributable to the seasonal adjustment. In late July, the seasonal adjustment pushed claims up, showing an alarming uptick in claims even when unadjusted claims have declined 20 percent over the last two weeks. Seasonal adjustments correct for anticipated seasonal trends—not unforeseen disruptions— which may result in seasonally-adjusted data showing trends that do not match facts on the ground during times of crisis.
Pandemic Unemployment Assistance (PUA) initial claims dropped to 829,967, non-seasonally adjusted. PUA and UI claims combined have fallen over the last two weeks, but PUA claims have been understated in recent weeks due to the lack of reporting from Arizona, which had until recently accounted for over 15 percent of weekly PUA claims. Because of the tremendous scale of the PUA program, until the Arizona data is restored, it will be difficult to say which way total initial claims across all programs are trending.
Continuing claims for unemployment insurance (UI) rose to 17 million for the week ending July 18, 2020, on a seasonally adjusted basis, and rising to 16.9 million on a non-seasonally adjusted basis. The continuing claims data this week includes the reference date for the July jobs report, to be released on Aug 7, pointing to a modest improvement in the labor market.
Earlier in July, labor market indicators appeared to show the recovery reversing and economic conditions worsening, raising fears of a W-shaped recovery. But as initial claims have declined over the last two weeks, it seems that the recovery is resuming cautiously. The speed bump in early July, however, is a pointed reminder of how fragile the recovery is.
Additionally, with the expanded $600/week unemployment benefits effectively expiring last Saturday, the income of tens of millions of unemployed Americans hangs in the balance. The combination of rising COVID-19 cases around the country, the withdrawal of financial support and an already fragile recovery puts the economy at risk of falling sideways—where conditions improve so sluggishly that the effects of the crisis become increasingly permanent.
To speak with Daniel Zhao about today’s report or to discuss labor market trends, contact pr at Glassdoor dot com. For the latest economics and labor market updates, follow @danielbzhao on Twitter and subscribe to Glassdoor Economic Research.
Daniel Zhao
Daniel Zhao is Chief Economist at Glassdoor. On Glassdoor's Economic Research team, he has conducted research using Glassdoor's unique data on a variety of topics affecting job seekers and employers ranging from the health of the job market to pay transparency to employee engagement & retention. His work has been cited in publications like the New York Times, the Harvard Business Review and more. Prior to joining the Economic Research team, he also worked on improving the user experience for Glassdoor’s consumer jobs product and mobile app. He holds a bachelor's degree in applied mathematics and economics from Harvard College.
Tags:Unemployment
