The jump represents the largest increase since April, putting total claims at nearly a million.

By Manuel Gutierrez, Consulting Economist to NKBA

 

With perhaps the exception of stock market prices and foreign trade statistics, Unemployment Claims are virtually the only economic data that are not derived through surveys. They reflect the actual number of individuals who apply for unemployment benefits in a given week. All other data, such as the unemployment rates, the number of new jobs, or the number of housing starts, are based on survey sampling from each of those populations.

The top panel of Figure 1 displays the number of persons who applied for unemployment benefits each week in 2020 through the first week of January 2021.

Claims for last week jumped by 181,000 from the prior week to nearly a million claims. This is the largest increase since April 2020.

In the decade prior to the pandemic and the government’s reaction to it, weekly claims averaged around 300,000 a week. The current economic recovery is still a long way from those healthier levels.

The combination of the pandemic’s second wave, which made its appearance in December, and the stronger mutant strain of the virus, has resulted in an economic setback. Not only was there an increase in claims, but the number of jobs fell in December — the first time since the recovery began last May.

The rising number of new COVID-19 cases by state seems to be working in lock step with the number of new unemployment claims by state.

Figure 2 shows unemployment claims data for the latest 15 weeks as a percentage of the number of claims in the first week of January 2020. The left panel identifies the six states that have recovered best, and the right panel the ones that fared the worst.

Points below the horizontal “zero” line indicate that claims in that week were fewer than in early 2020 and, conversely, points above indicate more claims than in the earlier date.

The latest data indicates that the number of claims in each of these top states is higher now than they were in January 2020. However, they are not demonstrably higher.

This is in sharp contrast to the bottom six states, shown in the right panel. For some, like Kansas and Colorado, the number of claims is more than 15 times greater, with the trend suggesting the situation is only going to get worse.

A weakness of this data is that only absolute numbers are reported because comparisons between states are misleading. Larger states with greater employment numbers will naturally report more claims.

For instance, Table 1 shows that California, at over 16 million, leads the nation in total number of employees. It also tops every other state in the number of filings for unemployment benefits. Finally, it boasts the highest ratio of claims to employment, 9.94 per thousand workers, which, of course, is not a good ratio.

Texas, on the other hand, with 12.4 million workers, or roughly two-thirds of California’s, has claims that are just 25% of the number seen in California. This has resulted in a ratio of 3.69 per thousand workers, barely more than a third the ratio of California, which clearly puts Texas in a lot better shape.

The three states shaded in gray in Table 1 are those with the proportionately lowest number of claims among the top 10 states for total employment. Note the large ratio difference for these three states compared to the other seven.

The employment figures for Florida and New York are very close, but the number of claims in New York is more than twice those of Florida.

Table 2 displays the 10 states with the lowest number of overall employees. The combined number of employees in these 10 states are less than they are in nine of the 10 states in Table 1. The ratio of jobless claims to total employed tends to be far greater than for the states with the highest employment rates. Vermont and Maine in particular, with ratios of 67.77 and 44.80, are off the charts.