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The Fuzzy Numbers Behind Initial Job Claims

Goverment statistics delude us once again
Thursday, September 29, 2016, 11:45 AM

“Fuzzy Numbers” is one of the most popular video chapters within The Crash Course. It explains many of the ways that government statisticians routinely distort economic truth, making things seem rosier than they are:

Please note that this is a non-partisan observation – every administration since LBJ has perpetuated and expanded the practice of economic self-delusion.

Debunking The Initial Jobs Claims Number

Today we’re going to solve the mystery of the low Initial Jobless Claims number we've been seeing recently. It's not nearly as low as advertised once you dig into the underlying 'fuzzy' math.

The 'Initial Jobless Claims' statistic measures the number of people filing for unemployment benefits. If more people are filing, the number goes up; presumably more people are losing their jobs and the employment rate is falling.

Oppositely, if fewer claims are filed, fewer people are losing their jobs and the employment rate is rising.

So low is good, and rising is bad. 

According to government statistics, this number is now pegged at four decade lows. Things haven’t been this good for the workforce in nearly 40 years!

As Zero Hedge recently reported, “Initial jobless claims remain stuck at four decade lows (254k this week)... so where are all the jobs?”

(Source

You’d think that with claims being at 40 year lows, there would be a robust jobs market you could point to -- a lot of confident, happy workers enjoying rising wages. And along with those rising wages we’d see rising tax receipts.

But we're seeing none of these. So what gives?

The answer is once again found by digging into the "fuzzy numbers" underlying the reported claims.

To understand the '40 year lows' statistic, all you really need to realize is that the proportion of workers eligible to receive such compensation is also at four decade lows:

SHARE OF UNEMPLOYED RECEIVING JOBLESS AID REMAINED AT RECORD LOW IN 2015

Feb 9, 2016

[T]he majority of unemployed people in the United States don’t get UI benefits. NELP called attention to the record-low recipiency rate for calendar year 2014 in its report, The Job Ahead. Using the latest data, we find that the recipiency rate in 2015 remained at a record low, with just over one in four jobless workers (27 percent) receiving UI benefits in 2015. Figure 1 below shows the national recipiency rate from 1972 through 2015, reported as a 12-month moving average.

(Source)

Oh, the percentage of jobless workers receiving benefits (meaning eligible for benefits) is at a four decade low? There! Mystery solved.

As the federal programs of jobless benefits wound down under Obama, the proportion of people covered by Unemployment Insurance (UI) fell. So the number of people eligible to receive benefits fell. And so the jobless claims fell.

Therefore the falling Initial Claims statistic is really a measure of how many fewer people today are eligible for benefits than compared to recent prior periods.  It says very little about the state of the job market and whole lot about how crappy the recently created jobs have been (so bad they don't elevate workers to the point of being eligible for them to make a jobless claim).

Just since 2011, the proportion of jobless workers receiving unemployment insurance plunged from 67% to a measly 27%. From two-thirds to just one in four.

That’s a huge drop.

No wonder the Initial Jobless Claims are mired at four decade lows.  It's no mystery at all.  It's less about fewer people filing than it is about fewer people being able to file.

Once again, Fuzzy Numbers like this only require a tiny bit of sleuthing to discover that they are abused to tell the tale that the politicians want told. But these accounting distortions are increasingly in conflict with what the rest of us observe with our own eyes on a daily basis.

This isn’t a robust jobs market, it’s the opposite. It’s thin and tenuous. To try and square up the low Initial Jobless Claims number with your own personal reality will only produce massive cognitive dissonance. Because the claims number doesn't reflect reality; it's a manufactured fiction.

In the future, my advice is to trust yourself.  Don’t trust the headlines. 

Lies lead to distortions, and those pile up. As I detail in my recent criticism of the central planners behind it all, eventually there’s Hell to Pay.

~ Chris Martenson

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6 Comments

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
Joined: Apr 30 2009
Posts: 789
I will not be distracted from today's glow

I've decided  if you guys can declare every Friday "Good News Friday," I can declare Hatch Chili day a good news day once a year.  Mostly, I take pleasure in harvests out of my back yard, but there are exceptions.

Life is good!

Uncletommy's picture
Uncletommy
Status: Platinum Member (Offline)
Joined: May 4 2014
Posts: 572
I don't know what you were doing last night. . .

There are days when I can't really understand why there is no work for so many people in such affluent countries as in North America. Just an example of what many of my neighbors were doing last night. Rain is predicted for tomorrow:

Perhaps it is because we use so much cheap slave energy that comes out of the ground. Garbage men paid more than bankers?  What about farmers?

http://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/...

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5418
jobless claims

I was wondering what was going on with that number!  I had stopped taking it seriously because it didn't seem to have any real predictive power as to what payrolls might be doing - and now it totally makes sense why that is.

Unconsciously, my brain had "routed around" the damage in that particular metric without me realizing it.

I wonder how many other numbers are like that.

Kim L. Law's picture
Kim L. Law
Status: Member (Offline)
Joined: Dec 5 2014
Posts: 19
Desperate Need for Jobs that Matter

Our society as a whole seem to be extremely deficient on jobs that truly matter. We have put far too many of our young people out of true productive work (hello higher education), or into professions that are of limited benefit (Medicine, Finance, Law, Service etc.). This combination perhaps have created the largest population of non productive people in human history.

The Permaculture movement seems to have failed utterly in this regard. I was in the recent North American Permaculture Convergence (NAPC), and to my dismay, despite their extensive knowledge of the problems that plague our modern world, they do not seem to know how (or care) to get people in actual productive work that feed themselves, their pockets and the need of our world. Many are still married to the current financial system, and are restricting their ideas and projects on the basis of insufficient funds. (Can't build houses because there's insufficient inches; how absurd is that?)

We desperately need a new paradigm that can channel the labor and energy of unemployed / underemployed / misemployed people into real productive (and regenerative) work. Something like an Eco Village where the community itself provides for its own needs and creates its own jobs. However, not with a 4 trillion dollar fund as an initial developmental cost to build a rich man's theme park (This was actually suggested by one of the NAPC leaders who was interested with building Eco Villages).

The only way I see this working is by dissociating currency from these work opportunities, as our current currency system has a knack for devaluing productive work completely (and vice versa). There needs to be a system where the workers are paid other than currency, instead with true wealth such as material capital / health capital / social capital / knowledge capital etc.

Also, a lot of internships for young people is asking for currency for participating in the program. I think that is really backwards as the whole point of internship is to trade productive work for knowledge / experiential capital (the upcoming international permaculture convergence, IPC, is an offender of this).

Kim

Nate's picture
Nate
Status: Platinum Member (Offline)
Joined: May 6 2009
Posts: 590
The Farm
Kim L. Law wrote:

We desperately need a new paradigm that can channel the labor and energy of unemployed / underemployed / misemployed people into real productive (and regenerative) work. Something like an Eco Village where the community itself provides for its own needs and creates its own jobs. However, not with a 4 trillion dollar fund as an initial developmental cost to build a rich man's theme park (This was actually suggested by one of the NAPC leaders who was interested with building Eco Villages).

Kim

This community meets several of needs you mentioned above. 

The Farm is an intentional community in Lewis County, Tennessee, near the town of Summertown, Tennessee,[1] based on principles of nonviolence, and respect for the Earth. It was founded in 1971 by Stephen Gaskin, and 320 San Francisco hippies;[2] The Farm is well known amongst hippies and other members of similar subcultures as well as by many vegetarians. In 2014, the Farm had approximately 200 residents.

https://en.wikipedia.org/wiki/The_Farm_%28Tennessee%29

http://www.thefarm.org/the-ecovillage-training-center/

 

 

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 837
I agree completely

Not withstanding the Farm, which may be something like what Kim wants, I have to say I agree completely, and I have been trying to get such a thing started with my son.

One of the unfortunate things, is that what I can afford is a $2000 plot of 1/16 of an acre.  I also had a $3000 such plot, but it appears to be contaminated.  So meanwhile, my son is starting on that.  But Portsmouth requires permits-for-use, and that requires survey... then also requires a submitted application...  the list goes on.

So this isn't just a thing where we can start it up. 

I'm sure the Portsmouth government doesn't realize it, but in order to lock everything down so they can be in control, they further the devaluation of labor.  Or maybe they don't intend it.  Anyhow, it's just where we are.

 

But I agree with you enough, Kim, that I have been trying.

 

 

 

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