Magazine article Economic Trends

Unemployment Claims

Magazine article Economic Trends

Unemployment Claims

Article excerpt

The number of initial claims for unemployment insurance is an important economic indicator because it provides frequent, timely information about the U.S. workforce. This number received a great deal of attention last month, because the four-week moving average exceeded 400,000, which many consider an indicator of recession. Other indicators, however, do not suggest a renewed recession. Even so, the unemployment insurance system provides a wealth of current labor market information.

Trends for continued claims resemble those for initial claims, but are slower to fall during a recovery because several weeks may pass before workers are employed again. After the recessions of 1990-91 and 2001 (which is widely believed to have ended last December), the number of continued claims stayed high for several months before starting to decline. During these so-called "jobless" recoveries, the average duration of unemployment continued to increase long after the recession ended, partly because some states opt to extend the maximum permissible period for claiming benefits, which is typically around 26 weeks. The cur rent average duration, 16.6 weeks, ks the longest since just after the 1981-82 recession.

Absolute measures of unemployment tend to increase as the labor force increases. A better measure of unemployment is the insured unemployment rate (the share of the labor force that claims unemployment benefits), which adjusts for the growth of the labor force. It is lower than the total unemployment rate because some unemployed persons do not qualify, or do not choose to receive benefits. Even under extended-benefit regimes, some workers cannot qualify. because they have been unemployed too long.

Unemployment claims data are compiled from each state into national figures, so they allow one to observe regional differences that may be obscured in sample-based measures like those derived from the Bureau of Labor Statistics' household survey. Some differences between states result from differences in their programs (for example, whether the state extends its benefits), but there are also striking regional differences in conditions. During 2002:IIQ, states that were heavily invested in hightech industries, including the West Coast states, Massachusetts, and New Jersey, posted insured unemployment rates that far exceeded the U.S. average. In the industrial Great Lakes region during the same period, some states did better than the national average and others did worse. …

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