International Forecaster Weekly

ANOTHER DAY, ANOTHER DATA DUMP - What Do the Jobless Claims Numbers Mean?

Another day, another drama, another slew of confusing data flowing out of government agencies.

The U.S. economy has created over 3 million jobs so far this year.

The number of people working as of July exceeded the total seen in February 2020, just before the economy dipped into recession, at least according to the National Bureau of Economic Research.

But it looks like the hiring binge could be winding down. In fact, many companies are now planning to cut back, largely because of the Fed’s rate hiking campaign and Quantitative Tightening to rein-in high inflation.

A new PwC survey shows that 50% of companies are planning to reduce their overall headcount. 

Additionally, 46% of companies said they’re ending or reducing signing bonuses, while 44% are rescinding offers (my daughter was a recent victim).

            Myles Udland believes that reducing overall headcount doesn't mean all of the respondents to PwC's survey are planning layoffs but indicates plans similar to what’s been going in tech.

As the report says: "Respondents are also taking proactive steps to streamline the workforce and establish the appropriate mix of worker skills for the future.”

That should come as no surprise. After a fury of hiring and a tight labor market over the past two years, executives see the distinction between having people and having people with the right skills."

Or, as Steven Covey once put it, having the right people in the right seats on the bus.

Since the labor market bottomed in April 2020, more than 22 million jobs have been added – or in many cases, added back – to the economy.

Fed Chair Jerome Powell told reporters last month, the U.S. labor market is "very hot." And those comments came before the government’s July jobs report showed 528,000 jobs were created last month.

This robust rebound, however, has been far from evenly spread across industries.

The nonpartisan Committee for a Responsible Federal Budget reports that overall leisure & hospitality employment is still down over 1 million jobs from February 2020.

At the same time, industries like "professional & business services" – which covers a host of white collar, Zoom-based, remote jobs – are up almost a million jobs (986,000) from pre-pandemic levels.

Udland says this uneven industry-level recovery “is why it sometimes feels like ‘everyone’ has gotten a new job in the last year while no restaurant…is fully staffed these days.”

Guest Writer | August 20, 2022

By Dave Allen for Discount Gold & Silver

Another day, another drama, another slew of confusing data flowing out of government agencies.

The U.S. economy has created over 3 million jobs so far this year.

The number of people working as of July exceeded the total seen in February 2020, just before the economy dipped into recession, at least according to the National Bureau of Economic Research.

But it looks like the hiring binge could be winding down. In fact, many companies are now planning to cut back, largely because of the Fed’s rate hiking campaign and Quantitative Tightening to rein-in high inflation.

A new PwC survey shows that 50% of companies are planning to reduce their overall headcount. 

Additionally, 46% of companies said they’re ending or reducing signing bonuses, while 44% are rescinding offers (my daughter was a recent victim).

            Myles Udland believes that reducing overall headcount doesn't mean all of the respondents to PwC's survey are planning layoffs but indicates plans similar to what’s been going in tech.

As the report says: "Respondents are also taking proactive steps to streamline the workforce and establish the appropriate mix of worker skills for the future.”

That should come as no surprise. After a fury of hiring and a tight labor market over the past two years, executives see the distinction between having people and having people with the right skills."

Or, as Steven Covey once put it, having the right people in the right seats on the bus.

Since the labor market bottomed in April 2020, more than 22 million jobs have been added – or in many cases, added back – to the economy.

Fed Chair Jerome Powell told reporters last month, the U.S. labor market is "very hot." And those comments came before the government’s July jobs report showed 528,000 jobs were created last month.

This robust rebound, however, has been far from evenly spread across industries.

The nonpartisan Committee for a Responsible Federal Budget reports that overall leisure & hospitality employment is still down over 1 million jobs from February 2020.

At the same time, industries like "professional & business services" – which covers a host of white collar, Zoom-based, remote jobs – are up almost a million jobs (986,000) from pre-pandemic levels.

Udland says this uneven industry-level recovery “is why it sometimes feels like ‘everyone’ has gotten a new job in the last year while no restaurant…is fully staffed these days.”

But Rejoice!

Courtenay Brown and Neil Irwin say the weekly jobless claim report “is a thing again.”

They write “the labor market remains resilient for now.” But many companies are bracing for a slowdown, with economists looking for any hints of brakes in durability.

Of course, no single economic indicator – even one that’s trailing – is always accurate much less perfect. And economists warn that this one is “riddled with caveats.”

Economist AnnElizabeth Konkel at the jobsite Indeed cautions, "When we're waiting for an inflection point, this report comes back into the spotlight. But it's difficult to interpret, so it makes it very hard to spot a turning point."

After steadily declining during the worst of the pandemic, weekly unemployment filings have been on the move.

250,000 Americans filed jobless claims with their states last week, roughly the same (slightly less) as the prior week, the Labor Department reported yesterday. The pre-pandemic weekly average in 2019 was about 218,000.

To smooth out volatility, economists prefer the four-week average of new claims (see chart).

As shown, on January 25, 2020 – right before a recession was declared – jobless claims averaged 207,750 over the previous four weeks. In mid-April that year, amid the nationwide shutdown, it had spiked to 5.3 million. 

By late August, it had fallen back under one million and fell steadily to a low of 170,500 by early April 2022, gradually rising since then – before edging down to 247,750 last week.

The data suggest more mixed signals, but Brown and Irwin say they show at least two things:

  1. Layoffs are trending upward, confirmed by companies across the country.Still, other reports show that layoffs remain at historically low levels. New claims, too, they argue, aren't consistent with a recession.
  2. Laid-off workers have plenty of new job opportunities.The Labor Department’s JOLTS survey shows two job openings for every unemployed adult right now.

B&I note that the weekly claims report “is a proxy for layoffs but says little about hiring. So, we’re left to read between the lines.”

Continuing claims, which show people who continue to file after first applying for unemployment benefits, are rising slower than initial claims.

This speaks to labor demand strength, as evident in the monthly nonfarm payrolls release, according to B&I. 

Economist Tuan Nguyen at RSM says, "Clearly, people are getting off unemployment benefits quickly because they can find jobs very easily." 

Analysts assume that when someone gets laid off, they eventually file for unemployment benefits. 

Thus, rising jobless claims is a sign that more people have lost work; when claims fall, fewer people are out of a job.

When the pandemic began, it was the timeliest data on what was happening in the labor market as the economy as a whole grinded close to a complete halt. 

Then, we remember warnings that the jobless report back then was undercounted, as state unemployment offices struggled to process the flood of filings.

As the labor market started to recover, more warnings came that the report may be sending mixed signals, particularly as the Labor Department changed how it calculates seasonal adjustments.

Now, the warning signs are flashing again. Recently, too big to fail Goldman Sachs argued that potentially fraudulent claims in Connecticut are actually inflated figures there.

What’s more, the megabank says, the recent jump in jobless claims "appears to be a statistical illusion" from seasonal adjustment factors, influenced by the huge changes during the pandemic.

Thus, they caution, don't expect economists to completely discount or ignore the report. They’ll keep weighing the jobless data against other indicators that continue to point to a healthy, sanguine labor market.

John Canavan at Oxford Economics says, "There is the monthly jobs report, and there's everything else. And I would say jobless claims falls into the category of everything else."