January 23, 2012

AP’s Rugaber Lowers the Bar For Unemployment Claims by Raising the ‘Strong Hiring’ Threshold

Two examples of poor press handling of what initially appeared to be fairly good news about initial unemployment claims last Thursday got lost in the pre-South Carolina primary hubbub.

The first and most obvious was in the writeup presented by the Associated Press’s Chris Rugaber. In his fourth paragraph, he raised the threshold below which a consistent level of weekly claims might be expected to move the unemployment rate downward by 15% from where it was less than 2-1/2 years ago:

The number of people seeking unemployment benefits plummeted last week to 352,000, the fewest since April 2008. The decline added to evidence that the job market is strengthening.

Applications fell 50,000, the biggest drop in the seasonally adjusted figure in more than six years, the Labor Department said Thursday. The four-week average, which smooths out fluctuations, dropped to 379,000. That’s the second-lowest such figure in more than three years.

A department spokesman cautioned that volatility at this time of year is common. Applications had jumped two weeks ago, largely because companies laid off thousands of temporary workers hired for the holidays.

Still, when weekly applications fall consistently below 375,000, it usually signals that hiring is strong enough to push down the unemployment rate.

Geez, Chris. In September 2009, in an analogous weekly claims report, you wrote the following:

Still, unemployment claims remain significantly above levels associated with a healthy economy and indicate that jobs remain scarce. Weekly initial claims are generally at 325,000 or below in a growing economy.

This would mean that if claims are above 325,000, the economy would be “generally” expected to be not growing meaningfully, generating jobs, or lowering the unemployment rate (or keeping an already low rate down).

No further elaboration is required, Chris. Gotcha — And please, don’t try to wiggle out of this by trying to distinguish between a growing economy and the unemployment rate coming down.

The second bust was the press’s failure to note that the sharp reported drop to 352,000 initial claims from the previous week’s 402,000 and from 415,000 during the the comparable week in 2011 was almost entirely due to the big difference between the seasonal adjustment factor used in 2012 compared to the one used in 2011. As noted here, if the factor used in 2011 had been applied to the 2012 data, initial claims would have come in at 394,000, not very impressive drop at all, and hardly evidence that, as Rugaber claimed, “the job market is strengthening.”

I’m not second-guessing what DOL does and how they do it (yet), but given that both years represented the full business week before the Martin Luther King holiday and that raw claims only dropped 5% from 2011 to 2012, it’s hard to see why the seasonal adjustment factors would have differed by so much.

As far as I can tell from reviewing several related press reports, nobody in the business press noted how the seasonal adjustment factor used on last week’s raw data caused reported initial claims to be artificially low in a very real sense.

Cross-posted at NewsBusters.org.


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