Jump in jobless claims is meaningless
11:06a ET July 31, 2008 (MarketWatch)
WASHINGTON (MarketWatch) -- Markets were spooked Thursday by the 44,000 jump in first-time applications for state jobless benefits to a five-year high of 448,000.
The sky must be falling, traders guessed.
Actually, no.
Make no mistake, the economy is extremely weak, and jobs are hard to find. But the latest data have nothing to do with that.
Simply put: The increase last week was due in large part to a government effort to beat the bushes and encourage those who've been out of work for a long time to apply for the extended federal benefits that Congress has approved. See full story.
Anyone applying for the federal benefits would not be included in the initial claims data, which only cover the regular state-run program. But it turned out that the states found plenty of people who were still eligible for state benefits, which typically run out after 26 weeks.
Usually, we watch the weekly initial claims numbers for one reason: To see if more people are losing their jobs. The latest jump reflected people who lost their jobs long ago, not new layoffs.
Some economists pointed to another technical reason (not a fundamental economic reason) for the elevated level of new claims: Seasonal adjustment problems. Usually, the automakers lay off lots of workers in early July to retool their plants, and then call them back later in the month. This year, there were fewer layoffs for retooling, and therefore fewer call backs. After seasonal adjustment factors were invoked, that meant a temporary bump up in the claims data.
More troubling was another number in the report: The number of people receiving the state benefits moved higher to 3.28 million, up about 25% from a year ago. That means it's much tougher to find a new job right now.
--Rex Nutting, Washington bureau chief
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