Following Trump Derangement Syndrome has distracted yours truly from blogging on the economy as much as usual for some time. Hopefully this post marks a bit of a return to that.
Initial unemployment claims have remained historically low since the election. This may be contrarian, but I believe that’s because of the ossification of the labor force and the presence of more jobs for which people can’t collect benefits if they’re let go. More on that in a bit, including perhaps an inkling of a turnaround in that evaluation.
But first, today’s report from the Department of Labor:
SEASONALLY ADJUSTED DATA
In the week ending January 7, the advance figure for seasonally adjusted initial claims was 247,000, an increase of 10,000 from the previous week’s revised level. The previous week’s level was revised up by 2,000 from 235,000 to 237,000. The 4-week moving average was 256,500, a decrease of 1,750 from the previous week’s revised average. The previous week’s average was revised up by 1,500 from 256,750 to 258,250.
The advance number of actual initial claims under state programs, unadjusted, totaled 409,869 in the week ending January 7, an increase of 59,308 (or 16.9 percent) from the previous week. The seasonal factors had expected an increase of 42,665 (or 12.2 percent) from the previous week. There were 502,904 initial claims in the comparable week in 2016.
The large year-over-year drop in actual layoffs in this particular week is interesting, in that it may foretell a very good January jobs report when it’s released in early February.
That’s because January is a month with huge actual job losses (routinely over 2.5 million every year, sometimes much higher). If this historically low number of actual layoffs continues, it could translate into a very high reported figure for seasonally adjusted jobs added in January’s jobs report. Low January let-go’s would be good news for the economy, because it would indicate that employers have decided to hang on to more of the people they hired during the Christmas season than usual. We’ll see.
Now let’s look at covered employment compared to total employment:
- In late 2008, covered employment peaked at 133.902 million.
- That figure hit a trough of 125.560 milion during the first quarter of 2011, and barely budged during the next quarter to 125.572 million.
- After that, the figure increased by an average of 369,000 during the next four quarters (thru Q2 2012). This is important to note, because the economy as whole was adding a far higher average of payroll jobs, meaning that it was adding a much lower than usual percentage of jobs covered by unemployment insurance.
- During the next three years, increases in covered employment roughly matched increases in payroll employment (thru 1Q 2015).
- Covered employment increases have exceeded payroll employment since then by about a half-million.
When all is said and done, covered employment at the end of 2008 (using employment data as of the end of the previous quarter, i.e., 3Q08) was 97.9 percent of payroll employment (the numbers: 133.902 million divided by 136.781 million).
At the end of 2016, the comparable figure (referencing 3Q16 payroll employment) was 95.5 percent (the numbers: 138.322 million divided by 144.808 million).
In other words, though there’s obviously some estimation involved here, at the end of Q316, over twice the percentage of the payroll workforce (4.5 percent) was in jobs which aren’t covered by unemployment insurance than were in that position at the end of Q308 (2.1 percent). The uncovered jobs would be primarily part-time in nature or relate to inconsistent work obtained through temporary help agencies.
In raw numbers, such workers numbered roughly 6.5 million in Q316. In 2008, they numbered only about 2.9 million.
This is a fundamental change which has occurred during the Obama administration which the press has either completely ignored or insisted on denying. If this had happened during a Republican or conservative administration, they’d have spent the past several years obsessing over it. It also ties into a former Obama administration economist’s report indicating that:
… from 2005 to 2015, the proportion of Americans workers engaged in what they refer to as “alternative work” soared during the Obama era, from 10.7% in 2005 to 15.8% in 2015. Alternative, or “gig” work is defined as “temporary help agency workers, on-call workers, contract company workers, independent contractors or freelancers”, and is generally unsteady, without a fixed paycheck and with virtually no benefits.
In general, there’s nothing necessarily wrong with this trend if freely chosen without duress. But it runs completely opposite to the type of economy “progressives” say they want (full-time work with gold-plated benefits), and it has occurred during — and I would argue, as a result of — the POR (Pelosi-Obama-Reid) economy and the historically awful Obama-era “recovery.”