Six weeks ago I did a post on the puzzling fall in unemployment claims:
The new claims for unemployment this week was a shockingly low 320,000, bringing the 4 week average down to 332,000
335,000, which is the lowest since October 2007. This graph shows the ratio of the 4 weeks average to US population (times 1000 to make it easier to read.)
The most recent week on the graph is at about 1.1, but today’s figures are at 1.049
1.058, if they were added. This means the ratio of new claims to pop is roughly back to the boom levels of 1999-2000 and 2006-07. And yet the other indicators (total jobs, unemployment rate, etc), remain deeply depressed.
I’m not going to redraw the graph, but with today’s numbers (308,000 on the 4 week average) we have fallen below the 0.1% level, meaning that fewer than 1/1000ths of Americans now file for unemployment comp each week. That’s not just boom conditions, it’s peak of boom conditions. The only other times this occurred since 1969 (when unemployment was 3.5%) were just a few weeks at the peak of the 2000 tech boom and a few weeks at the peak of the 2006 housing boom. In other words, the puzzle is now even greater than 6 weeks ago, as the unemployment rate is still at recession levels (7.3%.) Something very weird is going on in the labor markets.
I don’t have any good ideas. Perhaps employers are reluctant to add workers for some reason (Obamacare?) and instead work them overtime more. Then when demand falls instead of laying off workers, they cut overtime. But I don’t recall the average workweek numbers being all that unusual.
My hunch is that these new numbers portend further declines in the unemployment rate in the months ahead. Which is also a puzzle given that RGDP growth is about 2% in recent years.
PS. Part of the difference from 2000 is the lower LFPR, but even so, the current figures are shockingly low for a period of 7.3% unemployment
PPS. A Bentley student named Zachary Musso asked me to be interviewed on the Macro Tourist Hour, which he also participates in. Here is the link:
Unfortunately I am no good with technology, so you’ll only hear the audio from me.
PPPS. I was on panel at the Blouin Creative Leadership Conference in NYC on Tuesday. Perhaps there’ll be a link somewhere. One panelist said inflation was actually 7%.
I’ll try to get caught up with comments later.