The Job Increase That Wasn’t

Market Watch is reporting initial jobless claims jumped to 388,000 this week, showing a “sharp reversal from prior week caused by seasonal quirk.”  Remember, the Labor Department said two weeks ago that jobless claims had fallen to a four-year low.  This of course created the illusion there was an improvement, but unfortunately, it was just that — an illusion.  When properly reported and understood, the level of Unemployment Insurance (UI) claims should indicate whether layoffs are rising or falling, and there has been little change in these numbers for most of the year. 

Heritage’s James Sherk explains what actually happened last week:

“At the start of each quarter many people must re-apply for UI benefits. The Labor Department knows this happens and “seasonally adjusts” the data downward to remove this effect—many new applicants are not really “new.” California, however, failed to report the number of workers reapplying for benefits. As a result the seasonal adjustment factor overcompensated. The reported drop came from fewer-than-expected people reapplying for UI benefits because California messed up— not fewer people getting laid off.

He adds that normally:

“These figures shed light on the state of the economy: anything above 400,000 indicates recession territory, while figures below 330,000 show strong economic growth. Since the start of the year around 370,000 Americans have filed for benefits each week—below recessionary levels but still weak.”

While there has been a modest addition of jobs — 146,000 net jobs in the third quarter — “most of the increase is coming from fewer layoffs instead of an accelerated pace of hiring,” according to Market Watch.  A true acceleration is not predicted to occur any time soon, though, since businesses are hesitant to hire until they know how much or if their taxes are going to increase, the full cost of Obamacare, the impact of forthcoming EPA regulations and the outcome of Dodd-Frank rule writing (just to name a few).

With regard to the confusion a couple weeks ago, Sherk explains that more than anything else, this was simply a reminder that “large government bureaucracy’s often cannot get their act together.”

This was more than just a bureaucratic blunder, though; it was also a reminder (as if we need any more reminding) that we currently have a stagnant business environment that is simply not conducive to job creation.

Read More: Saving the American Dream

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