August 2020 Initial Unemployment Claims Rolling Average Now Under One Million

Market expectations for weekly initial unemployment claims (from Econoday) were 910 K to 1,175 K (consensus 958 K), and the Department of Labor reported 881,000 new claims. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 1,069,250 (reported last week as 1,068,000) to 991,750

Analyst Opinion of Initial Unemployment Claims

Note from the BLS:

REVISION TO SEASONAL ADJUSTMENT FACTORS

Beginning with the Unemployment Insurance (UI) Weekly Claims News Release issued Thursday, September 3, 2020, the methodology used to seasonally adjust the national initial claims and continued claims will reflect additive factors as opposed to multiplicative factors.

Seasonal adjustment factors can be either multiplicative or additive. A multiplicative seasonal effect is assumed to be proportional to the level of the series. A sudden large increase in the level of the series will be accompanied by a proportionally large seasonal effect. In contrast, an additive seasonal effect is assumed to be unaffected by the level of the series. In times of relative economic stability, the multiplicative option is generally preferred over the additive option. However, in the presence of a large level shift in a time series, multiplicative seasonal adjustment factors can result in systematic over- or under-adjustment of the series; in such cases, additive seasonal adjustment factors are preferred since they tend to more accurately track seasonal fluctuations in the series and have smaller revisions.

Prior to September 2020, the seasonally adjusted unemployment insurance claims series used multiplicative seasonal adjustment factors. Starting in September Bureau of Labor Statistics staff, who provide the seasonal adjustment factors, specified these series as additive. In accordance with the usual practice, the seasonal adjustment models and factors will be reviewed at the beginning of each calendar year, when prior years of seasonally adjusted estimates will be subject to revision.

Job's loss since the start of the pandemic is now 59,575,000. Many in this number are now employed or have dropped out of the workforce as all programs continuing claims number is 29,224,546].

It should be pointed out that Econintersect watches the year-over-year change in the 4-week moving average. There is always some seasonality that migrates into the seasonally adjusted data, and year-over-year comparisons help remove some seasonality. The four-week rolling average of initial claims is 358 % higher than one year ago (versus the 395 % higher last week).

Claim levels before the coronavirus pandemic were at 40-year lows (with the normal range around 350,000 weekly initial unemployment claims of levels seen historically during times of economic expansion - see chart below).

From the Department of Labor:

In the week ending August 29, the advance figure for seasonally adjusted initial claims was 881,000, a decrease of 130,000 from the previous week's revised level. The previous week's level was revised up by 5,000 from 1,006,000 to 1,011,000. The 4-week moving average was 991,750, a decrease of 77,500 from the previous week's revised average. The previous week's average was revised up by 1,250 from 1,068,000 to 1,069,250.

The advance seasonally adjusted insured unemployment rate was 9.1 percent for the week ending August 22, a decrease of 0.8 percentage point from the previous week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending August 22 was 13,254,000, a decrease of 1,238,000 from the previous week's revised level. The previous week's level was revised down by 43,000 from 14,535,000 to 14,492,000. The 4-week moving average was 14,496,250, a decrease of 709,000 from the previous week's revised average. The previous week's average was revised down by 10,500 from 15,215,750 to 15,205,250.

Continued claims give a good idea of the real unemployment levels as some unemployed would have found another job.