New jobless claims go back up...sort of. But definitely still YUGE

I always like it when there's a weird quirk in regular economic data that makes you have to go deeper than the typical headline story. Today, it involved the weekly report on unemployment claims, and most news organizations went with this theme.

New claims for unemployment benefits rose last week for the first time in four months — since March 28 — as states began reimposing lockdown restrictions in an effort to reverse a surge of coronavirus cases.

More than 1.4 million new claims were filed during the week ending July 18, an increase of more than 100,000 over the week before, the Labor Department reported Thursday.

In addition, claims for Pandemic Unemployment Assistance, which helps people who are self-employed or who don't qualify for regular benefits, went up nearly 20,000 to about 975,000.

The number of new claims had been steadily ticking downward since March, when nearly 7 million people filed for unemployment insurance in a single week. Last week's numbers marked the first reversal of that trend.

Unemployment claims UP by more than 100,000? And an 18th straight week of new claims going over 1.3 million?

Well, not exactly. CBS Marketwatch's Rex Nutting took a look at the Department of Labor's report, and he noticed that the actual number of people filing new claims went down.

In the real world, slightly fewer people lost their jobs last week than the week before. The widely anticipated re-weakening in the labor market in reaction to the surge in coronavirus infections isn’t yet showing up in the weekly claims data. A boost in new layoffs will probably show up soon enough.

The figures that were reported Thursday morning aren’t wrong, but they are misleading.

How did this happen? Our old friend, "seasonal adjustment", which assumed that the week after the 4th of July would have even more of a dropoff.

At the end of May (a week that included Memorial Day), that seasonal adjustment resulted in an expectation of fewer claims, so the numbers were inflated. Then that reversed throughout June and early July, which makes sense because in a typical year people would see school years and Summer festivals end, and there'd be a natural increase in layoffs. Until the post-4th week of July 18, which usually has few layoffs, and resulted in a jump in "seasonally-adjusted" claims.

Nutting adds that just because fewer people filed new regular unemployment claims, it doesn't mean we still aren't seeing an unprecedented number of layoffs. Especially when you combine the regular claims with the other main unemployment program that's in force today.

For one thing, the 1.42 million initial claims widely reported by the media don’t include the 975,000 people who filed for federal unemployment benefits under the CARES Act. Furthermore, the 1.42 million number has been seasonally adjusted to account for the typical spike of seasonal layoffs that didn’t happen this year. It doesn’t do the same seasonal adjustments with the CARES number.

So while most of the media reported that claims totaled 1.42 million last week on a seasonally adjusted basis, if you read the the Labor Department report you’ll find that the actual total of new filings (including those who filed under the CARES Act) was 2.35 million. That’s quite a difference!

In the real world, the number of people filing initial claims, including claims for federal pandemic benefits, dropped from 2.45 million to 2.35 million in the week ending July 18. A month ago, that figure was 2.34 million. So layoffs have been roughly flat for a month.

I've said for a while that the bigger stat to track is continuing claims, which gives a better idea of just how many people continue to be laid off. And while that number dropped in early July (the last week measured), we still have had more than 30 million Americans claiming benefits for each of the last 9 weeks.

But what makes me think that July's jobs report might be significantly worse than June's big increase isn't the continued large number of layoffs (although 2.4 million new claims a week is still huge). Instead, it's because there have been few places re-opening between June and July, unlike the previous two months. Which means the unemployment numbers will remain elevated, at levels that are even higher than what we had at the depths of the Great Recession.