Unemployment-Data Chaos: Labor Dept. Admits “Seasonal Adjustments” Went Haywire During Pandemic (why I stopped using them in May): Week 23 of U.S. Labor Market Collapse

27 million people still on unemployment rolls, or 16.9% of Labor Force. Initial claims under state and federal PUA programs tick up to 1.43 million in the week (not seasonally adjusted).

By Wolf Richter for WOLF STREET.

First the data, then the data chaos.

It’s still a historically catastrophic number, but it’s the least catastrophic number since mid-May: 27.02 million people (not seasonally adjusted) continued to claim unemployment insurance under all state and federal programs, down by 1.04 million from the prior week, according to the Department of Labor this morning.

This means that 16.9% of the civilian labor force (160 million) continues to claim unemployment benefits.

Blue columns – claims under state programs:

The number of people who continued claiming unemployment insurance (UI) under state programs fell by 272k to 13.9 million (not seasonally adjusted), in line with the downtrend that had started in May.

Red columns:

The number of people on UI under all federal programs established by the CARES Act and some other programs fell by 769k to 13.1 million (not seasonally adjusted):

  • Federal PUA claims fell by 252k to 10.97 million. The Pandemic Unemployment Assistance program, established under the CARES Act, covers contract workers, the self-employed, gig workers etc. who’d lost their work.
  • Federal PEUC claims jumped by 119k to 1.41 million. The Pandemic Emergency Unemployment Compensation program, established under the CARES Act, covers workers not covered by other programs.
  • State Extended Benefits more than doubled to 203k.
  • State Additional Benefits programs ticked up to 2.7k. This program, available in some states, covers people who exhausted their regular state benefits.
  • State STC / Workshare ticked down to 305k (employer avoids layoffs by reducing the number of regularly scheduled hours of work; employees receive some wages plus a prorata share of weekly benefits).
  • Federal Employees, continued claims ticked down to 14.0k.
  • Newly Discharged Veterans, continued claims ticked down to 13.6k.

The $600 a week in extra benefits – part of the CARES Act but expired at the end of July – were on top of these state and federal unemployment programs and are not included here. People who qualify for one of the state or federal programs received the extra $600 a week. This has been replaced by a program from the White House of $300 extra a week, that could become $400 a week in some states, and is now being rolled out by the states. All programs are administered through the same state unemployment office.

The newly-out-of-work: Initial UI Claims, state & federal:

Initial claims under state programs are an indication of the number of newly laid off workers. After having “unexpectedly” risen by 50k in the prior week, initial claims fell by 68k (not seasonally adjusted) in the week ended August 22, to 822k:

Initial claims under the federal PUA program for contract workers jumped to 608k, from 524k in the prior week (not seasonally adjusted).

Combined, state and federal initial claims ticked up to 1.43 million people who newly lost their work and filed for benefits during the week.

At this rate of 1.43 million initial claims per week (not seasonally adjusted) under the state programs and PUA, about 6 million people per month lose their work and file for unemployment compensation. In other words, on a monthly basis, as 6 million people still lose their work, over 6 million people must return to work for unemployment levels to improve.

Data Chaos, Part 2: Labor Department Admits “Seasonal Adjustments” Went Haywire During Pandemic.

During the early weeks of the collapse of the US labor market, it became clear to me that seasonal adjustments were exaggerating unemployment claims. So with the UI report on May 28, I switched to discussing only “not seasonally adjusted” unemployment claims. Today, in a special note, the Labor Department explained that my hunch was correct, and why it was correct, and that it would change its method starting in September.

Unemployment has seasonality. For example, there is strong hiring in October, November, and December by retailers for the Christmas Shopping Season. Then in January, these people get laid off, and many of them file for unemployment benefits, and so initial unemployment claims jump every year in late December and in January. This is predictable, and “seasonal adjustments” iron that out. There are also smaller seasonal variations over the spring and summer that are normally predictable and can be adjusted out of the data.

The way the Labor Department made those seasonal adjustments was by multiplying the not seasonally adjusted data by certain well-established factors for that season – the “multiplicative factors,” as it calls them. But during the Pandemic, the number of claims jumped by a never-before-seen magnitude (6 million in one week), and the “multiplicative factors” exaggerated the seasonally adjusted claims.

The chart below shows the difference between “seasonally adjusted” and “not seasonally adjusted” initial claims (“seasonally adjusted” claims minus “not seasonally adjusted” claims).

There is always a big difference in late December and January: not-seasonally adjusted claims jump as the retail workers get laid off, while the seasonally adjusted data irons out those jumps. You can see this on the chart by dips into the negative, showing the amount by which “seasonally adjusted” claims were smaller than “not seasonally adjusted” claims.

But starting on March 21, this method of “multiplicative factors” went totally haywire, one way, and then in early July the other way, and in late July and August it flipped again, and it continues to go haywire:

So the Labor Department is going to change the method, it announced today. And it explains:

“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.”

And this caused those adjustments to go haywire during the Pandemic, or as the DOL said, it created “systematic over- or under-adjustment of the series.”

The DOL will change from its old method of seasonal adjustments (“multiplicative factors”) to its new method of “additive factors.” And this “additive seasonal effect is assumed to be unaffected by the level of the series,” and tends to “more accurately track seasonal fluctuations in the series and have smaller revisions.”

So the DOL announced today, that starting in September, “the Bureau of Labor Statistics staff, who provide the seasonal adjustment factors, specified these series as additive.”

OK, so here you have part of the reason for the data chaos in the unemployment data that has been a key theme in my coverage of this mess since March.

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  56 comments for “Unemployment-Data Chaos: Labor Dept. Admits “Seasonal Adjustments” Went Haywire During Pandemic (why I stopped using them in May): Week 23 of U.S. Labor Market Collapse

  1. Still on unemployment and not getting enough to pay rent.

    • lenert says:

      Have you deferred rent and put all available monies in the stock market?

      • Good idea. I’ll get on that right away. Also going to defer all other expenses. I should be just about in time for a big reversal.

        • SuzeB says:

          Yeah, you might as well jump in feet first because you’ll certainly not be rewarded for saving any money after Mr. Powell’s speech this morning! Yay, the Fed to the rescue.

          So yeah, unless you’re going to take out a jumbo mortgage that you can’t afford go ahead, risk it all in the stock market! What have you got to lose except, oh, maybe 50%, your shirt or even more in a crash?

          That’s what makes gambling in the stock market fun and exciting: you could become super rich or you could lose half of it and maybe ALL of it! That’s why working people, retirees, average Joes and pensioners are all doing it – we’re all adrenaline junkies and we love the risky uncertainty! The anxiety is what makes it so rewarding. And yeah, we wanna be rich! I also really enjoy making the Ned Johnson’s of the world richer beyond their wildest dreams! Makes me feel warm and fuzzy inside.

    • The check is in the mail.

  2. MonkeyBusiness says:

    Looting should be considered as an official job. The rich are looting from the poor and the poor are looting the stores that belong to the rich.

    As long as looting occurs for at least an hour a week, that should be considered employment.

    • lenert says:

      But only if you’ve submitted 3 job apps and a clean wizz quiz in the same week.

      • Lee says:

        And only in a big city too, but you have to show your intent to work by filing receipts for work ‘equipment’ bought such as gasoline cans, gasoline, sledge hammers, hammers, and masks.

    • Citizen AllenM says:

      Well, if we don’t have a stake in society, we don’t *have* to follow the norms set out by old rich farts!

      Welcome to Brazil, there is a reason why Trump is such a fan of Bolsonaro.

      In short, just because you won by playing by the old rules doesn’t mean the next generation believes in them at all.

      So, why be surprised or even bitter?

    • Tony22 says:

      Looting Saks Fifth Avenue just shows the strength of brand loyalty and how effective advertising of luxury goods is. The RedWing workboot store was left untouched.

      • John King says:

        Really? Don’t they have LeBron James RedWing workboots?

      • TonTon says:

        Have you noticed how they loot stores that have easily removable and expensive items but they burn stores that do not, e.g. Automobile stores, Large furniture stores and Restaurants.

        • p coyle says:

          would you rather carry home six purses/shoes/perfume/etc. worth $100 each or one $600 dresser or random car axle?

    • Looting only really pays at the top level. You can’t even sell those TVs for half of what the stores are charging… as for the top level, they need to make that more accessible to the common person

    • Petunia says:

      Actually, income from illegal activities is fully taxable, so looting is already a job.

      • SiT23 says:

        But if the income is taxable, if you declare yourself to be a self employed contracting looter all your expenses will be tax deductible.

        • sierra7 says:

          And if you lose money “looting” in the year there will be a box to “tick” on your income tax return: “Check box if loses in looting exceed $500” Go to instructions that will advise to follow the questions and you will end up with an additional deduction of $750 in income.
          There’s something for everyone now. No one is to be left behind.

          (In addition I just received my IRS tax refund that I filed in first week of April 2020.)

        • Wisdom Seeker says:

          Probably can deduct depreciation on the merchandise, too. Stolen goods take a deep value hit when they leave the showroom!

  3. Bobby Dents says:

    There is no 300$$$ Trump’s executive order was baseless.

  4. At what point do Federal claims exceed state claims and what exactly does that mean? The norm is Fed claims are smaller, relative to state. The people covered by Federal claims are marginal workers, (gig, and contract) and there are a lot more of them than we thought. We knew the labor market was tight. These are structural problems that will persist. Probably also spells wage inflation.

    • edmondo says:

      Wage inflation with 27 million unemployed? I’m pretty sure that scenario doesn’t keep Jerome Powell up at night.

      • MonkeyBusiness says:

        Jerome Powell can’t sleep at night. But not because he’s worried of anything, but because he’s super excited for having brought utopia into existence.

        Wage inflation? None. Asset inflation? Are you kidding?

        • I guess my point was that these marginal jobs would need to be raised to a higher standard. (There’s a bill in Ca to deny Uber drivers employee benefits. It’s really cute too, smiling drivers) The red bar, 14M people, says these are sub living wage jobs which do not qualify for benefits. You can give fry cooks $15 hour, but when you miss a demographic this size you have a problem no industrial nation can afford.

  5. David Hall says:

    The FRED (Fed) webpage stated the not seasonally adjusted unemployment rate was 10.5% for July. Their chart showed unemployment peaked at 14.4% in April of 2020.

    I cannot see where the Wolf Street numbers are coming from.

    • Wisdom Seeker says:

      Wolf covers that discrepancy whenever the survey-based unemployment report comes out.

      There are more people known to be on continued unemployment claims than 10%. So the 10% number is deeply suspect… or else states are fudging their claims numbers and paying out a lot more claims for some unfathomable reason. But hey, in a country where dead people can vote and live people are often pressured not too…

    • Paulo says:

      Exactly, on CNN this morning they stated 10.4% which must be totally bogus.

    • Nevnej says:

      I believe the headline unemployment rate is those claiming under state programs (not including gig or contract workers) divided by the work force covered by stae unemployment insurance programs (much less than 160 million).

    • Wolf Richter says:

      David Hall,

      For crying out loud, READ MORE THAN JUST THE HEADLINE BEFORE YOU COMMENT about the article. At least, READ THE FIRST 2 PARAGRAPHS and CLICK ON THE LINK in the first paragraph! It has all the data.

      You will then see that 27 million people receiving unemployment compensation amounts to 16.9% of the labor force of 160 million (27/160 = 0.169). All in the first two paragraphs above the first chart.

    • Nik says:

      Irrespective of the numbers being used nor seasonal ‘hocus pocus’..one does not need to be a ‘Phi Beta Kappa’ to understand..that week in and week out,whatever the weekly unemployment number..Released. There is no way in Hell,that many people were Re-Employed the week before..correct?

  6. NY Geezer says:

    It would be fortunate if there were no relationship between loss of jobs and loss of healthcare, and the effect such loss has on US Covid stats. I am sure there is a relationship to healthcare and it has some effect on Covid stats, but I have not found any data.

  7. 91B20 1stCav (AUS) says:

    …and the aging, fantastic snake of ‘official’ vs. real unemployment numbers ups it’s rate of tail-consumption…

    may we all find a better day.

  8. Robert says:

    Lord and Taylor is closing all stores. Heard it was the oldest department store in America.

    • Petunia says:

      In NYC it was one of the great stores on Fifth Ave. We used to line up to see its show stopping Xmas display every year. That’s something you won’t see on the internet. It is truly the end of an era.

      Brought to you by your friendly Wall Street hedge fund, more shareholder value.

      • polecat says:

        ‘Escape from Deblasio’ … or Cuomo’, take yer pick!

        Coming to a drive-in hopefully not near you!

  9. lenert says:

    The prime age employment rate had just barely returned to its pre-GFC level before the pandemic. Today participation is back to 1983 levels – two months after bottoming at early 1970s’ levels. We get back another 35 years in the next 4 months and we’ll be set no problemo.

  10. Michael Engel says:

    1) SPX daily TD Camouflge.
    2) Yesterday SPX had a TD party.
    3) Today close was > yesterday close.
    4) Today close was < today open (a red doji star).
    5) Today high was above the true high two bars earlier.

    • Zantetsu says:

      Hi Michael, you can’t use tea leaves to predict the market. Just saying.

  11. Michael Engel says:

    Lord & Taylor bought Fortunoff in 2008.

    • Petunia says:

      Fortunoff’s, another great store destroyed by your friends on Wall Street, unlocking still more shareholder value.

      • Lisa_Hooker says:

        Petunia, we don’t unlock anymore. We just smash a window, hop inside, and pass out some shares. Don’t know which method is worse, but they’re not the way I was brought up.

        • Wisdom Seeker says:

          Damn straight.

          The real looters destroying productive businesses aren’t guys in masks roaming the streets at night.

          They’re private equity finance guys in suits roaming Wall Street by day, looking for a company they can pillage with an LBO for a quick payout.

          That entire business practice should be illegal, but we’re deep into the Bastiat Zone (“when plunder becomes a way of life … they create for themselves a legal system that authorizes it …”).

  12. dan says:

    Good enough for government work…

  13. Michael Engel says:

    1) NBA players are employed.
    2) NBA players will send the owners to the BK court.
    3) The BK court will transfer ownership to the strong hands of the players,
    after the weak owners will default on their obligations.
    4) That tremors will cause an earthquake to the major networks.

    • Petunia says:

      I don’t know much about sports, but players who can’t keep hold of their own money are unlikely to hold on to the team’s money. Besides, nobody is watching anyway.

      • Zantetsu says:

        That’s kind of pejorative towards pro athletes. How do you know that the current team owners “keep hold of their own money” better than the average player?

      • Anthony A. says:

        Certainly not us….especially the NBA. Next to be followed by not watching the NFL. Baseball, what a cluster…………!

        Oh, we got a FULL refund for the Texans season tickets we buy annually in February. They actually raised the price 8% for the 2020 season. There will be a lot of empty seats in the NFL stadiums this year.

        We are done with it all.

        • Paulo says:

          Obviously you haven’t seen a hockey game. Your above list are just sports, hockey is a bit more than that. :-)

        • Lisa_Hooker says:

          @Paulo – American football can be a bit more at times, but it’s an awfully slow game.

        • 91B20 1stCav (AUS) says:

          Would big-time sports now be considered as “…the opiate of the masses…” in Mr.Marx’ theories? Discuss.

          May we all stay well and find a better day.

  14. noname says:

    Be leery of lower COVID rates in GOP-run states as well. I’ve read of two “OOPS!” “miscalculations” recently. Sickening. One step closer to removing the “R” from my voter reg. card.

    • Wisdom Seeker says:

      As opposed to California’s huge fiasco in completely failing to account for their test numbers for like a month? And somehow the senior government officials didn’t get informed?

      The failings are bipartisan.

      Given that we can’t even count a few million lab tests properly, in a matter of life and death, it really makes me doubt the election system…

      • noname says:

        Considering these “R” governors were lauded for their handling of the virus and are now up-and-comers in the party, my concern is warranted.

        I no longer pay any attention to CA and I’m sure the vast majority of Americans outside CA’s borders don’t either. I think it’s obvious D’s don’t know how to run cities or states—I just despise the hypocrisy of R’s.

  15. Lee says:

    From various articles about unemployment in the USA it seems that are some (perverse?) incentives to go to work – just as in Australia.

    First, if you work in a face-to-face environment then you probably have a better than average chance of catching the virus as a result of all the interactions going on.

    Second, depending on the income you get, you’d be better off either not working or see the increase in income on a per hour basis is so marginal that it isn’t worth working at all.

    (In that last category it is especially so for married couples in Australia where one person can retire on the Age Pension and the other is working at a low paid job around the minimum wage area.

    If just getting over minimum wage from working full time, the other person’s pension will be reduced by 25 cents on the dollar after the basic threshold is met – somewhere around A$7000 a year.

    Then they’ll have to pay income tax and medical insurance levy on that income as well. And when figuring the other person’s reduction in pension income they use GROSS income before taxes are taken out which makes the result even worse.

    Add in all the costs of ‘going to work’ such as travel and clothes also reduces the net amount.

    The final result would be around 50% of the income from working going up in smoke.

    Would you really want to get up, get ready, travel on public transport for several hours each day at least, work in a crap job putting up with irate customers and dickhead bosses only to see more than half of your income gone before you see it?)

    Third, there has to be some envy around by people who are still working at crap, low income jobs when they see somebody making more than they are from sitting at home. I’d guess that many of them would probably want to be in the same situation.

    (Oh, and we had another wind storm here in Melbourne yesterday and last night that resulted in three people dying from being crushed by falling trees – some were in cars.

    And the electricity supply went out in some areas which resulted in the water supply being contaminated in 90 suburbs around the city so they have boil their water in order to use it.

    Aren’t we a wonderful modern city?.

    Virus deaths here were 12 more and a little over 100 cases. Our postcode has 9 active cases in total now down from 20 at the start of August.)

  16. Lisa_Hooker says:

    Good to hear that the BLS is changing to yet another methodology to get the numbers where they want them. I understand completely, don’t confuse me with facts.

  17. sierra7 says:

    What a “Cluster&*^%!”
    No other words for all of this.
    Best comment on this posting (Wisdom Seeker):
    “but we’re deep into the Bastiat Zone (“when plunder becomes a way of life … they create for themselves a legal system that authorizes it …”).
    Can’t be said any better……

Comments are closed.