After non-farm payrolls, GDP and CPI and new home sales, the jobless claims report is probably the useless data report released by the Government. It supposedly measures the relative strength of the jobs market by indexing the weekly number of new claims for jobless benefits. However, there’s two obvious and distinct problems with this report.
First and foremost, the data is based on weekly reports filed by each State’s unemployment insurance claims office. The data is often subject to delayed reporting and reporting errors. And, of course the data gets to go through the Governments trusty “seasonal adjustments” meat grinder. That latter fact alone renders the data completely suspect.
But there’s bigger problem. It has to do with the nature of the labor force. Obviously we’ve seen ad nauseum that the labor force participation rate graph is falling go quickly that it appears to trying to dig a hole to China. As the actual number of workers in the labor force declines, the layoff rate declines and therefore the rate of workers (who qualify) file of jobless benefits declines.
Furthermore, by the Government’s own rigged numbers, since 2008 character of the workforce has been shifting from full-time to part-time. Part of the reason for this is that Companies can eliminate the expense of paying unemployment insurance by replacing full-time workers with part-time employees, even if it means hiring a few more bodies. Full-time workers are entitled to health insurance, pension and unemployment insurance benefits. By eliminating the need to pay these entitlements, the cost of paying three part-time workers in place of two full-time workers.
The OBVIOUS result of this workforce demographic shift is that there will be a lot less workers filing for jobless claims on a weekly basis simply because the labor force is composed of a significantly higher percentage of workers who do not qualify to file for jobless benefits when they get “downsized.”
Ergo, the weekly jobless claims filings decline over time, as do the 4 week running continuing claims. The idiots on bubblevision (CNBC, Bloomberg, and Fox Biz) report the continuously low – relative to history – weekly jobless benefit filings with a high-five and an end zone dance because they think it reflects a healthy labor market. But, quite the contrary, the low weekly jobless benefits claims reflects a tragically declining labor rate participation rate and workforce composition demographic that is riddled with terminal pancreas cancer.
As you can see the regional Fed metrics are showing a stunning negative divergence from the Government massaged reports. Which one do you trust?
Furthermore, Challenger, Gray released its monthly layoff report this morning which showed that layoffs surged 43% in September. Yet, these layoffs didn’t move the needle on the weekly jobless claims, which Bloomberg bills as being “near a decade low.”
I suspect the real layoff numbers are even worse than is being reflected by Challenger, Gray and the Fed surveys. The housing and auto industries are turning lower again rather quickly. The construction industry employs a lot of independent contractors who don’t register as part of the labor force and thus don’t register as “unemployed” when they can’t get contract work. Soon retailers and restaurants will cutting a lot jobs and then the real fun begins…