Recruiters speak to potential candidates at a career fair in Leesburg, Va. On October 21, 2021.
ANDREW CABALLERO-REYNOLDS | AFP | Getty Images
Unemployment benefit claims fell to their lowest level in over 50 years the week before Thanksgiving – a remarkable rebound from nosebleed levels earlier in the Covid-19 pandemic.
This reduction is good news for the US economy and labor market. However, the main figure hides a detail that likely makes the data appear too rosy, according to labor experts.
“I wouldn’t be putting out party hats just yet,” said AnnElizabeth Konkel, economist at the job site Indeed.
Workers filed 199,000 initial claims during the week ending Nov. 20, the US Department of Labor reported on Wednesday. (Initial claims are an approximation of claims for benefits.) This is the lowest number since the week ending November 15, 1969, and a decrease of 71,000 from the previous week.
But that figure has a seasonal adjustment, which controls the layoff patterns that occur at various times of the year. (For example, layoffs typically increase in construction and agriculture during the colder months.)
The unadjusted number (which reflects the actual number of complaints) tells a different story. Initial unadjusted claims rose 18,000 to nearly 259,000 the week before Thanksgiving.
How can seasonally adjusted and unadjusted data move in opposite directions?
Basically, the Department of Labor expected significantly more workers to claim benefits than during the week before Thanksgiving. (They forecast about 70,000 more.) This has translated into a sharp decline in seasonally adjusted claims.
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“It’s kind of an art,” said Susan Houseman, research director at the WE Upjohn Institute for Employment Research, of seasonal adjustment. “In that sense, I wouldn’t fuss too much about the fact that this is the smallest number of [unemployment] claims since 1969.
That said, unemployment claims are generally moving in a positive direction.
The level of initial unadjusted claims is roughly equivalent to the week leading up to Thanksgiving 2019, which was a strong period for the U.S. economy, Houseman said. It’s also a dramatic reduction from around 6 million new requests per week at the height of the pandemic.
Employers are retaining workers instead of firing them, at a time when it is difficult for many to find and keep their existing employees, according to Daniel Zhao, senior economist at Glassdoor.
“Ultimately, the holistic picture provided by all of our economic data is that the economy is recovering from the delta downturn,” Zhao said, referring to the Covid-19 variant.
Taking into account seasonal volatility, data adjustments generally give a more accurate representation of economic trends.
But the exercise has proven more difficult for federal agencies during the pandemic, and is generally more difficult during the holidays, according to Zhao.
Supply chain issues may also have disrupted typical seasonal work patterns in some industries, perhaps if they caused earlier layoffs, for example, he said.
“It appears that last week’s numbers, in particular, were partly due to the seasonal adjustment,” Zhao said of the sharp decline in seasonal claims. “I expect to see a rebound in claims in the coming weeks.”
In addition, according to economists, comparing claims over several decades (whether adjusted or not) is difficult because of the different rules for collecting benefits over time.
Many states, for example, made it more difficult to obtain benefits after the Great Recession, which would tend to reduce the number of people seeking help compared to previous years. However, increased awareness of the availability of benefits during the pandemic could push more people to apply.