Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Rise in Initial Unemployment Claims Shows Lack of Economic Recovery
The US Bureau of Labor Statistics seems to be playing games with its so-called seasonally adjusted data on unemployment. In the week ending July 13, the advance figure for seasonally adjusted initial claims was 334,000, a decrease of 24,000 from the previous week's revised figure of 358,000. The unadjusted rate, the actual number of claims filed, was 408,710, an increase of 25,350 from the preceding week’s claims of 383,360. Instead of the improvement indicated by the seasonally adjusted data, there was a worsening indicated by the actual data. CNBC as usual only reported the seasonally adjusted figure, which no doubt gave the stock markets a lift.
A comparison of the seasonally adjusted columns with the unadjusted columns for the two years reveals little if any correlation. As an economist, I find little value in seasonally adjusting weekly data. One can caution the user of actual data that any significant changes or unusual circumstances such as strikes, seasonal layoffs, etc. affected the data. Those circumstances can change weekly but it is hard to visualize seasonal changes that affect weekly numbers significantly. The seasonal variations in the two periods show no seasonal pattern. The Bureau would be better advised to simply report the actual weekly data adding only unusual circumstances that probably affected the actual numbers.
More important, the bureau does not report the seasonal factors that affected the data. In such circumstances, seasonal adjustments are more likely to obscure the trends affecting the data than help in interpreting the data.
The actual data, taken in conjunction with concurrent events portray the true economic conditions affecting the economy. And they are not pretty.
The federal government has spent trillions of dollars on all sorts of so-called Keynesian initiatives. But Keynes himself would long ago have denied their relevance to the U.S. economy of 2009 and the following years. First, he would have recognized the danger that the increased international trade deficits of the past decade and a half posed for the U.S. worker and was on record as saying that Britain would never tolerate being the victim of beggar-thy-neighbor trade policies. Congress and leaders of both parties advocated free trade policies even when our trading partners pursued mercantilist policies. Second, he would have recognized that the U.S. government by its foolish housing policies was itself the principal cause of the recession of 2008-2009 and the Federal Reserve administered those foolish policies. Third, he would have recognized that the environmental radicals wanted nothing less than a decline in U.S. industrial power and a redistribution of income to third world countries.. Fourth, he would have decried the fact that wind, solar, ands biochemical substitution for fossil fuels could not meet the most elemental tests of cost-benefit analysis and made a negative contribution to GDP.
Chairman Bernanke and Secretary of the Treasury Lew both claimed this week that we were making a modest economic recovery. The former backed down from his proposal to reduce purchases of U.S. Treasurys. The purchase of the Fed of government bonds is simply printing money. Nevertheless, the very suggestion of reducing the purchase of Treasurys sent the stock market reeling. What a recovery! The joke is that both claimed that unemployment was less than 7 percent when in fact fifteen or twenty percent is closer to the reality if one counts those working part-time involuntarily and includes the millions who are no longer looking for work.
The policies of the Fed and the Treasury are doing nothing for the unemployed and the underemployed but they are contributing to a worsening of the distribution of income and wealth. The easy money policy has raised asset prices, especially the prices of corporate stock. The DOW this week reached new highs. Luxury boutiques are doing well. Thousands of new millionaires have been created. Unemployment among blacks is the worst of any ethnic group followed closely by Hispanics.
Mortimer Zuckerman, Editor and Publisher of US News and World Report, wrote this week:
"The Great Recession, as it is now commonly called, is the longest and worst recession since the end of WWII. It is also marked by the weakest recovery from any recession that we have had in that same period. In June, the government's Household Survey reported that since the start of the year, the number of people with jobs increased by 753,000 - but there are "jobs" and then there are jobs. No fewer than 557,000 of these jobs were only part-time. The Survey also reported that in the month of June, full-time jobs declined by 240,000, while part-time jobs soared by 360,000 and have now reached an all-time high of 28,059,000, three million more than when the recession began at the end of 2007. By contrast, the number of people working full-time actually fell. That's just for starters. The Survey includes involuntary part-time workers, as well as those who want to work but have stopped looking, and that puts the real unemployment rate for June at 14.3 percent, up surprisingly from 13.8 percent in May."
If anything he understates the problem. But there can be no doubt that things are getting worse not better.
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