The seasonal adjustment might be different, but the layoffs are still huge

Today's new unemployment claim numbers had numbers worth digging into, and I will do that shortly. But the report was also noteworthy because it was the first one to use a new seasonal adjustment method, as the Department of Labor explains in the report.

Seasonal adjustment factors can be either multiplicative or additive. A multiplicative seasonal effect is assumed to be proportional to the level of the series. A sudden large increase in the level of the series will be accompanied by a proportionally large seasonal effect. In contrast, an additive seasonal effect is assumed to be unaffected by the level of the series. In times of relative economic stability, the multiplicative option is generally preferred over the additive option. However, in the presence of a large level shift in a time series, multiplicative seasonal adjustment factors can result in systematic over-or under-adjustment of the series; in such cases, additive seasonal adjustment factors are preferred since they tend to more accurately track seasonal fluctuations in the series and have smaller revisions.

Prior to September 2020, the seasonally adjusted unemployment insurance claims series used multiplicative seasonal adjustment factors. Starting in September Bureau of Labor Statistics staff, who provide the seasonal adjustment factors, specified these series as additive. In accordance with the usual practice, the seasonal adjustment models and factors will be reviewed at the beginning of each calendar year, when prior years of seasonally adjusted estimates will be subject to revision.

Basically, the amount of unemployment claims have become so large that assuming a 4% seasonal adjustment (for example), becomes a lot bigger compared to a more normal time, and the DOL says this isn't giving as an accurate a picture for where things really stand.

Yes, I understand that you would be suspicious of this, as you should of anything coming out of TrumpWorld in these next 60 days. And I don't think it's coincidentally that this change comes after several Summer months where the adjustments caused seasonally adjusted claims were notably higher than the actual number of claims. But it actually makes sense to me, as these adjustments stop being seasonal after a certain level of change (350,000 unemployment claims might logically have a seasonal influence of 14,000, but 1 million wouldn't have 40,000 of those claims be affected by the season), and this is generally what happens with the payroll numbers in the monthly jobs reports.

So let's take a look at what happened for this report with the new seasonal adjustment in place.

New applications for unemployment benefits fell sharply last week to a fresh pandemic low, but the entire decline stemmed from a major change in how the data is reported instead of more people finding jobs. The labor market showed no progress absent the change.

Initial jobless claims fell by 130,000 to a seasonally adjusted 881,000 in the last week of August, the Labor Department said Thursday. These figures reflect applications filed the traditional way through state unemployment offices.

As the article alludes to, instead of having the seasonal adjustment be around 20% of claims (or 165,000 in this case), it was a little over 47,600. And that's almost all of the difference between last week's seasonally adjusted total of 1,011,000 new claims and this week's 881,000.

But in the COVID World, the regular unemployment claims only tell part of the story. There is also the PUA numbers for gig economy workers and the self-employed, and those numbers went way up by more than 150,000 compared to the week before.

Last wk, workers filed 833K UI initial claims + 759K PUA claims = another 1.6 million NSA claims, the 4th straight wkly increase.

The increase in #joblessclaims in Aug has been largely driven by PUA, as historically elevated layoffs continue.

1/ pic.twitter.com/ytI5Sn250Y

— Daniel Zhao (@DanielBZhao) September 3, 2020

In addition, the number of people continuing to file unemployment claims went back up for the week of August 15 (the last week measured for this stat), with as many people filing PUA claims as the "regular" unemployment claims.

Bottom line on jobs: The US had 29 million people on unemployment aid in mid-August -- nearly 1 out of every 5 workers.

There is still a massive unemployment crisis with more layoffs/furloughs from United Airlines and others looming.https://t.co/BdScWJFVig via @emrosenberg

— Heather Long (@byHeatherLong) September 3, 2020

That rise in continuing unemployment claims happened in the same week that August jobs survey took place, and I have to wonder if that'll reflect in the jobs numbers from tomorrow. Granted, some of that will be offset by the 237,000 people that were hired for the Census last month, but Americans continue to be laid off in unprecedented numbers nearly 6 months after COVID-19 started breaking out nationwide.

And those Census jobs will go away in the next months (especially since TrumpWorld wants it done ahead of schedule), and there is a dwindling source of jobs that have yet to come back - almost all sectors of the economy is generally "reopened", there just aren't enough customers to warrant bringing back more workers. We may have regained more than 40% of the jobs lost in the last 3 months measured, but that last 60% seems like it'll take a lot longer to return....if they ever do.