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No Improvement in Employment

“Fewer Americans than anticipated filed claims for unemployment insurance last week as an administrative backlog subsided and indicating companies are nearing the end of major staff cuts as the economy recovers. ” That’s how Bloomberg saw it today.

Rupert Murdoch’s Marketwatch put it this way- “First-time filings for state unemployment benefits dropped by their largest amount since July, putting the trend in claims back on the downward track that economists had cited as evidence that the ailing labor market may have begun to heal.”

Of course, nothing could be further from the truth. Unemployment claims always have large declines in February, and this year’s rate of decline is no better or worse than last year’s when the economy was in the throes of outright panic triggered by the Fed’s policy blunders.

These charts tell the story. Click on the charts to view in a separate window, then click on them again to view full size.

Click to enlarge
Click to enlarge

The trend of rising unemployment remains intact. The spike in 2008 was an outlier caused by the Fed’s blunder of withdrawing cash from the trading accounts of the Primary Dealers. That triggered a stock market crash and consequently an economic panic.

So far, the underlying trend has not been violated, as evidenced by the ongoing rise in the 2 year moving averages. A bigger problem is the trend toward fewer numbers of people being eligible for unemployment compensation. That would tend to lead toward lower first time claims.

This year’s seasonal drop in claims looks much like last year’s. The seasonal trough comes at the end of May. At this point, the graphs are about the same amount above the uptrend lines as they were in February 2007, which suggests that the secular trend is still intact. If those trendlines are broken before the seasonal low around Memorial Day, then we can conclude that things are improving. So far, the evidence is, at best, unclear.  Since the graphs remain above the rising 2 year moving averages, the safer bet is that unemployment is still in a rising trend.

This chart frames the problem best.

Series Id: LNU02300000

Not Seasonally Adjusted

Series title: (Unadj) Employment-Population Ratio

Labor force status: Employment-population ratio

Type of data: Percent or rate

Age: 16 years and over


The total number of people employed has broken a 38 year uptrend.

The downtrend currently under way is unprecedented in modern US history and shows no sign of abating.

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