Unemployment Insurance Claims – Jobs. Trends. Insight.

UI Claims Rise by 11,000 as Employers Skip Normal January Hiring Spree; Next Week Critical

By Charles Thibault on January 15, 2010 in Unemployment Insurance Claims.

New Unemployment Insurance Claims rose by 11,000 in this week's Department of Labor Report. Employers missed their usual January rendez-vous with job seekers – Hiring Demand fell by 7% or 15,000 new online job ads** last week on a seasonally adjusted basis. Employers can make it up next week, however.

December and January employment data is highly volatile in terms of seasonal fluctuations. Job ads usually drop heavily during Christmas-time and then pop back up in January.

What's more, there's something we call "the January bounce" – not only does January Hiring Demand come back from the Holiday slump, it usually jumps above previous December levels. New budgets are usually the source of this "January Bounce" – there's a sort of pent-up demand for labor that's waiting for a new budget cycle to kick in.

During the last week of December, UI Claims benefited from a smaller than expected seasonal dip in Hiring Demand (UI claims improved by 22,000). This week, however, UI Claims suffered from a smaller than expected January rebound in Hiring Demand.

The two tables below show historical December/January seasonal fluctuations, compared to what we've seen so far this year.

Good News from UI Claims Report as Hiring Demand Jumps; Forecast of -18,000 for Next Week

By Charles Thibault on December 31, 2009 in Unemployment Insurance Claims.

The Department of Labor released some good news this morning: there were 22,000 fewer new Unemployment Insurance claims compared to the prior week, a 4.8% drop. Our forecast was for a drop of 6,000 so the news is better than we had expected. This improvement in the UI claims report comes as the number of online job ads jumped 8.6% in a single week on a seasonally adjusted basis.

This news also confirms our expectation that the Bureau of Labor Statistics will announce increases in levels of US employment for December.

The correlation between the number of new online job postings (Hiring Demand) and unemployment insurance claims has been -0.72 over the past 4 years. As more new online job ads appear on the internet, more people can find work, and fewer must file for unemployment insurance – hence the <negative> sign on the correlation coefficient. What's more, the correlation improves to -0.80 when looking at the one-week lagged value of Hiring Demand, supporting the hypothesis that Hiring Demand leads UI claims by a week. (Remember that the "best correlation" possible is -1.0 when two variables move in opposite directions).

Given the strength and robustness of this relationship, we can forecast changes to UI Claims data using the number of new online job ads. WANTED Technologies predicts that new UI Claims will fall by 18,000 on a seasonally adjusted basis for the week ending January 2^nd.

UI Claims Rise; Forecast of -6,000 for Next Week

By Charles Thibault on December 18, 2009 in Unemployment Insurance Claims.

The Department of Labor announced this morning that new UI claims increased by 7,000 for the week ending December 5^th. This corresponds to the movements we've seen in Hiring Demand: improving greatly in October/November but softening during this first half of December.

The correlation between the number of new online job ads (Hiring Demand) and unemployment insurance claims has been -0.72 over the past 4 years. As more new online job ads appear on the internet, more people can find work, and fewer must file for unemployment insurance – hence the <negative> sign on the correlation coefficient. What's more, the correlation improves to -0.80 when looking at the one-week lagged value of Hiring Demand, suggesting that Hiring Demand leads published measures of labor market dynamics. (Remember that the "best correlation" possible is -1.0 when two variables move in opposite directions).

Given the strength and robustness of this relationship, we can forecast movements in the seasonally adjusted value of new Unemployment Insurance Claims: WANTED Technologies predicts that new UI Claims will fall by 6,000 on a seasonally adjusted basis for the week ending Dec.19.

The following graph shows the historical relationship between the number of new online jobs and new Unemployment Insurance Claims, on a seasonally unadjusted basis.

Click chart to view full size

UI Claims Rise as Job Ads Fall Slightly

By Charles Thibault on December 11, 2009 in Unemployment Insurance Claims.

The Department of Labor announced this week a rise of 17,000 new UI claims, on a seasonally adjusted basis. This matches the slight fall we saw in our Hiring Demand Indicators .

This week, Hiring Demand grew only 3.9% on a seasonally unadjusted basis. Over the past 5 years, the first week of December usually sees a little bit of a rebound in Hiring Demand. This year's "post-Thanksgiving rebound" was the lowest we've seen in 5 years. This is what drove new UI claims upward. Even last year, when the economy took a huge hit, the first week of December saw Hiring Demand rebound almost 25% after Thanksgiving.

Table: Week-over-Week % Growth, Hiring Demand Indicators, First week of December

Date	Growth Compared to Prior Week
12/3/2005	6.1%
12/2/2006	16.0%
12/8/2007	6.5%
12/6/2008	24.6%
12/5/2009	3.9%

The graph below shows the historical relationship between Hiring Demand Indicators (the number of new online job ads) and seasonally unadjusted Unemployment Insurance claims. The UI claims axes has been inverted: as new job ads appear online, fewer people must file for unemployment insurance. The correlation between the two variables, over the past 4 years, has been -0.72. What's more, the correlation between new UI claims and the one-week lagged value of Hiring Demand improves to -0.78, suggesting that Hiring Demand leads new UI claims.

Click chart to view full size

UI Claims Improving on Steady Hiring Demand Trend

By Charles Thibault on December 3, 2009 in Unemployment Insurance Claims.

The Department of Labor announced this morning another drop in the number of new UI claimants. This week, there were 5,000 fewer claims on a SA basis (seasonally adjusted). This comes after last week's impressive (or surprising) drop of 39,000 claimants.

Since new UI claims reached a peak in late March 2009, they have trended downwards 3% a month on average. Hiring Demand (the number of new online job ads) has improved at an average rate of 1% a month since then too.

Last week's report of a drop of 39,000 claimants came as a surprise. Some have suggested that the economic conditions we're in have "tricked" the seasonal adjustment factors. Bradford DeLong, for example, suggests that because there aren't as many construction workers employed now compared to historical levels, the seasonal increase in new UI claims that comes from them being laid off right before Thanksgiving didn't really happen this year.

Our data, however, confirms that last week's improvment of 39,000 UI claims was in fact "real". (The initial report was for 35,000). Over the past several years, the number of new online job ads usually drops about 24% during Thanksgiving week. This year, the drop was only 11.6%. In other words, given the seasonal patterns we've seen in our data over the past five years, the improvement in the UI Claims report make sense:

Year	% Change HDI, Thanksgiving Week
2005	-24.2%
2006	-27.0%
2007	-25.7%
2008	-21.1%
2009	-11.6%

What makes us think that there's any relationship between this lower than expected drop in new online job ads and the sudden improvement in new UI claims?

Increase in UI Claims Masked by Revisions; Thanksgiving Seasonal Hit Next Week

By Charles Thibault on November 19, 2009 in Unemployment Insurance Claims.

Although the Department of Labor announced this morning that New Unemployment Insurance Claims remained unchanged, the critical nuance is that they remained unchanged "from the previous week's revised figure of 505,000". Last week's unrevised figure was 502,000. So, in fact, and as we had foretold last week, new UI Claims have increased by 3,000 since last week.

The level of Hiring Demand has also remained unchanged on a seasonally unadjusted level, even as new UI claims dropped by 53,000. New online job ads fell by only 1,700.

The following graph, where the UI Claims axis has been inverted to facilitate the visual interpretation of the relationship, shows how the two variables have been moving in tandem over the past 4 years:

Click chart to view full size

Positive UI Report Driven By Seasonal Factor – Expect Bad Report Next Week

By Charles Thibault on November 13, 2009 in Unemployment Insurance Claims.

The Department of Labor announced yesterday that New Unemployment Insurance Claims fell by 12,000 on a seasonally adjusted basis.

Seasonally adjusted counts are driven by seasonally unadjusted counts and a seasonal correction factor. On a seasonally unadjusted basis, new UI Claims rose 47,000. This was driven by a drop of 40,000 new online job ads two weeks ago. Last week, new online job ads rose by only 16,000.

The correlation between Hiring Demand (new online job ads, weekly) and New Unemployment Insurance Claims has been -0.71 over the past four years. As new job ads appear online, more people can find work, and fewer must file unemployment insurance claims – hence the negative sign on the correlation coefficient. What's more, the correlation between the one-week lagged value of new online jobs and and new UI claims is -0.77, which supports the hypothesis that Hiring Demand is a leading indicator of published labor market data. Remember that a correlation coefficient is bounded between -1 and 1, where values of -1 or 1 imply a perfect relationship between two variables (you can usually only get a perfect correlation if you correlate a variable with itself, which isn't of much use…). So Hiring Demand closely tracks new UI Claims.

Click chart to view full size

What can we expect for next week's report? Three factors are at play: new UI claims on a seasonally unadjusted basis, the seasonal correction factor (which produces the seasonally adjusted count), and the number of new online job ads.

Equity Markets Up on UI Claims Data

By Charles Thibault on November 5, 2009 in Unemployment Insurance Claims.

The Department of Labor announced a fall of 20,000 new Unemployment Insurance claimants, on a seasonally adjusted basis. Stock markets rose at least 1.5% this morning based on this data, even though we had predicted this drop in new UI claims in last week's analysis.

New UI Claims also fell on a seasonally unadjusted basis, falling 14,000 new claimants. This corresponds to a rise of 40,000 new online job ads the week before.

The relationship between new UI claims and online job ads is quite strong: the correlation between the two variables has been -0.70 over the past four years. As more job ads are posted online, more people can find work, and fewer must file unemployment insurance claims – hence the negative sign on the correlation coefficient. What’s more, the correlation increases to -0.76 when we examine the one week lagged value of online job ads, which supports the hypothesis that Hiring Demand leads published measures of labor market dynamics. The UI Claims axes has been inverted on the graph below to facilitate interpretation.

Click chart to view full size

What can we expect from next week's UI claims report? We expect little to no change in next week's report. Two factors come into play: the number of online job and the seasonal correction parameter. We saw a drop of 44,000 new online job ads this week. This means that new UI claims will rise on a seasonally unadjusted basis. The multiplicative seasonal correction factor is moving from 1.07 to 0.95, so we're being accommodated there. In order to maintain the same levels on a seasonally adjusted basis, new UI claims need to rise to 539,000, a jump of 59,500 new claims. Given historical data, this week's drop in online job ads corresponds almost exactly to this expected rise in new UI claims (every new online jobs produce -1.36 new UI claims).

UI Claims Remain Unchanged

By Charles Thibault on October 29, 2009 in Unemployment Insurance Claims.

The Department of Labor announced this morning that new UI claims fell by only 1,000 last week, settling to 530,000 once seasonally adjusted. Based on the number of new job ads we saw over the past two weeks, we had predicted a stable to improving UI report.

On a seasonally unadjusted basis, the number of new UI claims rose by 32,00 claimants, even as the number of online job ads rose slightly by 2,000 ads. However, this is probably due to the drop of 32,000 that we saw two weeks ago.

The relationship between new UI claims and the level of online job ads is quite strong: the correlation between the two variables has been -0.70 over the past four years. As more job ads are posted online, more people can find work, and fewer must file for unemployment insurance – hence the negative sign on the correlation coefficient. What’s more, the correlation increases to -0.76 when we examine the one week lagged value of online job ads, which supports the hypothesis that Hiring Demand leads published measures of labor market dynamics. The second lag stays strong at -0.72 as well. The UI Claims axes has been inverted on the graph below to facilitate interpretation.

Click chart to view full size

What can we expect from next week's UI Claims report? The number of online job ads rose by 2,000 last week and again by 31,000 this week, settling to 371,000. The multiplicative seasonal correction factor is moving from 92.9 to 93.8, which is almost no change at all. The influx of new job ads should drive the seasonally unadjusted UI claims count downwards. With a fixed seasonal correction factor, new Unemployment Insurance Claims should fall again.

Don't Believe "Softness" of Labor Market Based on this Week's UI Claims

By Charles Thibault on October 22, 2009 in Unemployment Insurance Claims.

The Department of Labor announced this morning an increase of 11,000 new UI claims on a seasonally adjusted basis, just as we had predicted last week.

However, most of this is due to the seasonal fluctuation parameter. The variance around the "true number of new UI Claims on a seasonally adjusted basis" can be greater when a data series goes through high levels of seasonal fluctuations. That's what happened this week. The multiplicative seasonal adjustment factor went from 1.02 to 1.15, which means that we expected a drop in new UI claims of about 13% due to seasonal fluctuations alone. If new UI claims don't fall enough on a seasonally unadjusted basis, they grow on a seasonally adjusted basis. We had seen a drop in new job ads last week, which meant we were expected more UI claims. This drop in the number of job ads, in addition to the severity of the seasonal fluctuation, led to this week's "negative" report.

So, for example, CNBC interpreted the news as "indicating the labor market remained fragile despite some signs of an economic recovery." We did predict a rise in new UI Claims, but that was mostly driven by a very severe change in the seasonal adjustment factor. Had the seasonal correction factor been 1.13 instead of 1.15, seasonally adjusted UI claims would have remained unchanged.

Remember that the relationship between new UI claims and the level of online job ads is quite strong: the correlation between the two has been -0.70 over the past four years. What’s more, the correlation increases to -0.76 when we examine the one week lagged value of online job ads, which supports the hypothesis that Hiring Demand leads published measures of labor market dynamics. As more job ads are posted online, more people can find work, and fewer must file for unemployment insurance – hence the negative sign on the correlation coefficient.

The UI Claims axes has been inverted on the graph below to facilitate interpretation.

Click chart to view full size

Hiring Demand fell again this week, dropping from 336,000 new online job ads to 330,000. This drop of only 6,000 new job ads is much less severe than the drop of 36,000 we saw the week before. What's more, the seasonal adjustment parameter is swinging back the other way, from 1.15 to 1.075. Combining these two factors, we predict improvements in next week's UI claims report, putting us back "on trend". (Hiring Demand dropped, but the seasonal coefficient on UI claims overcomes this).

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