The jobs report that came out on Thursday had (seemingly) good news:
The Labor Department said Thursday that weekly unemployment benefit applications dropped 5,000 to a seasonally adjusted 330,000. That’s the fewest since January 2008.
So, all is good . . . right? Not so. There are two things that are might be causing these numbers to be inflated. First, the BI reported the day the jobs report came out:
Earlier this morning, we learned that weekly initial jobless claims fell to a 5-year low of 330k. This was much lower than the 355k economists were expecting.
So, is this reason to cheer?
According to a research firm cited by the Wall Street Journal’s Vincent Cignarella, this week’s number may be skewed.
…a small San Francisco research firm suggests it has more to do with the fact that California, whose 38 million population gives it the biggest workforce in the nation, hasn’t filed its claims numbers for past two weeks.
That meant the state’s bean counters had to come up with a guesstimate — and by Southbay Research’s reckoning, they may have come up with too low a number.
Interesting to note that this is not the first time that California’s jobs numbers have come into question. Last October, there were questions as to whether the BLS included California’s data in the nationwide statistics (first reported as a mystery state responsible for the drop in jobless claims). Here is what the Business Insider first reported:
Earlier this morning, the Department of Labor reported that initial jobless claims plunged to 339K from 369K a week ago.
Economists were looking for a reading of 370k. Immediately, Twitter exploded with tweets mocking Jack Welch, who claimed last week’s jobs report was fixed to artificially drop the September unemployment rate to 7.8 percent from 8.1 percent in August.
Coincidentally, cryptic messages came through from Bloomberg and the WSJ that raised doubts about today’s report. From Bloomberg:
One state accounted for most of the plunge in claims, a Labor Department spokesman said as the data were issued to the press.
And from the WSJ:
“However, the report may not be as positive as the sharp drop indicates. A Labor Department economist said one large state didn’t report additional quarterly figures as expected, accounting for a substantial part of the decrease.”
Initially, rumors started circulating that an entire state’s worth of jobless claims was excluded.
The DoL was not immediately available to comment.
However, CNBC’s Kelly Evans is reporting that the discrepancy is that “one state did not process & report its typical seasonal workload” and that a rebound next week is likely.
Ultimately, the situation was resolved:
Well, we’re glad to say that we’ve finally gotten to the bottom of what happened.
We spoke to an analyst at the Labor Department. According to this analyst, here’s what happened:
- ALL STATES WERE INCLUDED in this week’s jobless claims. Assertions that “a large state” was excluded from the report are patently false.
HOWEVER…
- It is likely that some of the jobless claims in one large state–California–were not included in the claims reported to the Department of Labor this week. This happens occasionally, the analyst says. When a state’s jobless claims bureau is short-staffed, sometimes the state does not process all of the claims that came in during the week in time to get them to the DOL. The analyst believes that this is what happened this week.
- California claims that were not processed in time to get into this week’s jobless report will appear in future reports, most likely next week’s or the following week’s. In other words, those reports might be modestly higher than expected.
- The analyst believes that the number of California claims that were not processed might have totalled about 15,000-25,000. Thus, if one were to “normalize” the overall not-seasonally-adjusted jobless claims number, it would increase by about 15,000-25,000.
- This week’s “normalized” jobless claims number, therefore, might be about 355,000-365,000, not the 339,000 that was reported. This compares to the 370,000 consensus expectation.
In other words, had all of California’s jobless claims been processed in time to make the jobless-claims release, this jobless number would still have been better than economists were expecting–but not as much better as it appeared.
Again, the as-yet-unprocessed claims will appear in future reports. So next week’s number may well be higher than expected.
So, who’s right about today’s jobless claims number?
It seems everyone’s right!
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Jobless claims were better than expected, even after adjusting for a possible unusual anomaly
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There may have been an unusual anomaly that made this week’s jobless claims look better than they would otherwise have been.
On the other-side of the map, massive decrease in jobless claims in New York is might be the result of the uptick in construction following the destruction of Hurricane Sandy (broken window anyone?). From Matt Phillips at Quartz:
The weekly look at US applications for unemployment benefits showed the lowest reading since January 2008, with claims falling to 330,000. As a rule of thumb, the market views anything under 400,000 as an indication that the economy is generating sustainable job growth.
Still, take these numbers with something of a grain of salt. The weeks around the end of the year can wreak havoc with the government’s seasonal adjustment models. See the official BLS statement.
On the other hand, the surge in construction hiring in the aftermath of Superstorm Sandy seems to be materializing in full force. (For the record, we told you this would happen months ago.) Among states, New York, which was one of those worst hit by the storm, posted the largest decline in jobless claims during the month with more than 27,000, which was attributed to “fewer layoffs in transportation, construction, and educational service industries.”
Conspiracy theories aside, the data of the jobs report is not as rosy as it might appear. First, the data on California is questionable because the hard statistics are not yet available, and the uptick in NY construction as a result of Hurricane Sandy (which we can assume is true for New Jersey’s construction industries as well) is not long-term employment, meaning it is not an indication of a reviving industry.
