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COVID-19 Recession: No Sign Of A Recovery – The iM-Weekly Unemployment Monitor Update 8/20/2020

Today’s DOL Unemployment Insurance Weekly Claims shows some improvement in the employment situation.

The non-seasonal adjusted initial claims at 891,510 are up by 52,776 when compared to the previous week. However, the non-seasonal adjusted continuous insured unemployed at 14,265,344 have decreased by 935,998 over the last week, which is encouraging.

Also, the total persons claiming some form of UI benefit as of July 25 are reported by the DOI as 28,059,349, a decrease of 197,601 from last week’s upward revised figure. These figures signal that there is no significant improvement in job losses, or return to work numbers due to easing of the Covid-19 recession.

The figure below shows that currently, the lowest unemployment rate should be 17.6%. And, if one added the historic 2.6% UCR-PCR spread, then the actual unemployment rate should be 20.2%. Hence, there is no improvement in the recovery of jobs and number of persons out of work.

In the current Covid-19 situation, we believe that the only meaningful figures from DOL’s weekly report are:

  • The non-seasonal adjusted Insured Unemployed.
  • The total of all persons claiming unemployment benefits in all programs, which includes persons receiving Covid-19 relief who would normally not fall into the insured employed, e.g. self-employed tech workers.

In the figure above we graph the following:

  1. The monthly unemployment rate (UER) as published by the BLS, plotted 2 weeks earlier from the reporting date. (The May UER which is published beginning June is plotted from mid-May to mid-June.)
  2. The insured unemployed rate (IUR) is the percentage of insured unemployed persons (not seasonally adjusted) of the labor force. (The number of insured unemployed is published every Thursday, looking back 2 weeks in the DOL’s weekly Unemployment Insurance Weekly Claims report. The labor force is published monthly by the BLS with the Employment Situation Summary.)
  3. The unemployed persons claiming rate (PCR) is the percentage of persons of the labor force claiming UI benefits in all programs, including the insured unemployed. (The total number of persons claiming benefit is published weekly looking three weeks back.)
  4. The spread UER-IUR, historically at 2.6% (2019 average).
  5. The spread UER-PCR, also historically at 2.6%, as the majority of persons claiming benefit were the insured unemployed.

A recovery would be indicated by the following:

  1. Significant and continuous decline in the insured unemployment rate, together with a
  2. significant decline of total persons claiming benefit, which implies
  3. the spread UER-PCR approaching its historic value of 2.6%.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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