New Jobless Claims Cast Doubt on Recovery Winter

Everyone seems to be impressed by the low levels of new unemployment insurance claims that have been filed in 2012.  I look at the numbers and notice how high new claims are relative to layoffs.  The data suggest that nearly everyone who has lost their job through a layoff or reduction in force files for unemployment benefits.  Before the recession, that was not the case.  Job losers are much more pessimistic about their chances of finding a new job than they should be if the economy was enjoying a recovery winter.

A little over two million new claims were filed in the first four weeks of the year.  That’s about 12% less than were filed over a comparable period in 2011, and 27% less than in 2010.  I am not surprised by this decline because there must be layoffs before there can be new jobless claims.  Unemployed workers must be job losers to be eligible for unemployment insurance.  The BLS labor turnover survey (JOLTS) indicates that layoffs have fallen even more dramatically than new jobless claims since the recession.

The following chart shows new unemployment insurance claims and layoffs each month between 2001 and 2011.  The figures are not seasonally adjusted – layoffs and UI claims spike up in January and are lowest in the fall every year.

Between 2001 and the fall of 2008 there were 19% fewer jobless claims than there were layoffs.  A disturbing pattern has emerged beginning in the fall of 2008.  Since November of 2008 about 11% more people filed for UI benefits than there have been job losses through layoffs.  Some of the excess new claimants were likely deemed ineligible for unemployment insurance.  Even so, the fraction of laid off workers who rely on unemployment insurance is at an all-time high.  This suggests job losers are pessimistic about their prospects of finding a new job and is a leading indicator that, despite what some are saying, it will be a while before hiring picks up.

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