About Those Initial Jobless Claims “Anomalies”

5 May

Ever notice that when economic numbers “disappoint” its always because of some one-time, special circumstance that seasonal adjustments failed to account for (and why should we “adjust” for them, even if we could?)?  Over the past two years, some of the BS excuses I’ve seen have ranged from plausible to impossible, and everywhere in between.  Today, the Department of Labor (via Bloomberg) tells us :

Applications for jobless benefits jumped by 43,000 to 474,000 in the week ended April 30, the most since August, Labor Department figures showed today. A spring break holiday in New York, a new emergency benefits program in Oregon and auto shutdowns caused by the disaster in Japan were the main reasons for the surge, a Labor Department spokesman said as the data was released to the press.

I’m curious – and if anyone can answer this please enlighten us in the comments – how, on God’s green earth, a (regular) spring break holiday in New York could have possibly caused initial claims to increase at all, let alone to any meaningful level such that it was worth mentioning explicitly.  Additionally, I’m not sure to which Oregon unemployment program the article refers, however as far as I can tell, it is the (up to) 6-week EXTENSION of existing benefits available to those who have exhausted all other programs, see OEB-3 details here.

As far as auto plant shutdowns, I’m not so sure those 1. increased unemployment (are workers at idled plants laid off, put on temporary leave with pay, without pay, some combination, other?) and 2. had any effect this week at all.  GM doesn’t appear to have issued any 8-K’s about plant closures.  Ford filed an 8-K with the SEC on 4/11 in which the company acknowledged:

We now expect that beginning in the last week of April and continuing into May, certain of our operations in the Asia-Pacific region (including certain of our joint venture operations) will be affected by shortages of components and vehicle kits as a result of the events in Japan.  Although this likely will require us and the affected joint venture affiliates to reduce or temporarily cease production of certain vehicles in the Asia-Pacific region, we do not expect this production disruption would have a material impact on our overall results.

Notice there is no mention of disruptions to U.S. operations.

Toyota, likely the firm most affected by the Earthquake/Tsunami/Nuclear situation in Japan issued a 6-k on 4/20, wherein the company said:

Production at North American plants is to be suspended on Mondays and Fridays between April 26 and June 3.  Also, production from Tuesdays through Thursdays will be carried out at approximately 50% of normal.

As far as I can tell, it’s not immediately clear whether any plant closures included lay-offs which would have resulted in more people eligible to (initially) claim unemployment benefits.  Most of the other announcements from auto manufacturers I’ve read indicate that firms were first cutting back on overtime and working on days-off, not eliminating normal shifts.

There’s some other curious nuggets in the Bloomberg article, like this one:

The productivity of U.S. workers slowed in the first quarter and labor costs rose as a growing economy prompted companies to boost employment, another report from the Labor Department showed today.

The measure of employee output per hour increased at a 1.6 percent annual rate, after a 2.9 percent gain in the prior three months. Expenses per employee climbed at a 1 percent rate after dropping 1 percent.

This seems to be another case of a journalist (and possibly some government type) not understanding basic math.  If the above numbers are correct, productivity did not slow; the rate of change (e.g 2nd derivative) of productivity slowed, but productivity still increased, just at a slower rate.

All things considered, I’m not sure why so many people (including several who should know better) still think unemployment is going to keep decreasing when there’s little incentive to hire more.  So doing would eat-into corporate margins (and thereby stock prices), and so long as firms can get more productivity out of their existing employees, they have little-to-no reason to hire more.


6 Responses to “About Those Initial Jobless Claims “Anomalies””

  1. Alex Gloy May 5, 2011 at 11:04 am #

    You seem to work under the assumption the actions of the Fed, BLS, congress etc are guided by reason and for the benefit society. Once you drop that assumption, everything makes sense. “Spring break” is just a lame attempt at putting up a smoke screen so rational people like you and me are confused. While we ponder the merit of their bogus arguments, the economic and political elite is free to continue their destructive work.

    • The Analyst May 5, 2011 at 11:11 am #

      I think its true that the majority of people who read that bbg article probably took everything they say at face-value, unfortunately…

      • sanchk May 6, 2011 at 4:19 am #

        According to MarketWatch, which FT Alphaville references, in New York State educational workers such as bus drivers (?… sure there are better examples here..) are allowed to claim benefits over spring break holiday. That could contribute significantly to the UI claims bump, and I would understand why it isn’t seasonally adjusted as I don’t think spring break holds a fixed date in the calendar year; it would be a very temporary bump though, so nothing much to read into that.

        Additionally, we’re looking at UI claims, not change in unemployment figures – so although extending the benefits in Oregon technically did not result in an increase in the number of people claiming unemployment benefits, without the extension people would have lost the ability to make the claims, and we would have seen a lower number of claims than was actually recorded.

        I agree with you on your analysis of the auto industry. Regarding the Bloomberg nugget, I think by saying productivity ‘slowed’ they implied a drop in the second derivative, not an outright flip in sign (in which case they probably would have said ‘productivity declined’). They certainly could have made it more visual though – I like the CalculatedRisk graphs on these kind of figures.

        One final comment – I think a lot of people are cynical about the unemployment numbers, in the sense that they think unemployment is falling because people are actually dropping out of the workforce. I don’t see very much optimism regarding getting more people employed, especially with the austerity mood biting and the sluggish growth forecasts. All of this suggests more action or policy needed somewhere to stem the dropout, lest we end up with far too many dependents in the population.

        • sanchk May 6, 2011 at 4:24 am #

          I should add that in spite of the seemingly one-off events, the trend in the past few weeks has been upwards, so not much to look forward to.


  1. FT Alphaville » When indicators disappoint - May 5, 2011

    […] Stone Street Advisors has more. […]

  2. Thursday links: adaptive systems | Abnormal Returns - May 5, 2011

    […] unemployment claims are jumping once again.  (Calculated Risk, WSJ, Bespoke, Capital Spectator, Stone Street, Calafia Beach Pundit, Political […]

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