UI Claims Rise as Weekly Layoffs Continue

Daniel Zhao

September 3, 2020

Initial unemployment insurance (UI) claims rose last week, an indicator that the weekly layoffs may be rising as the labor market recovery reaches a plateau. This comes at a time when the Department of Labor is adjusting its seasonal adjustment methodology to better capture the current labor market in the depths of an unprecedented crisis. Initial UI claims inched up by just 7,591, rising to 833,352 from 825,761, on a non-seasonally adjusted basis, according to the latest figures from the Department of Labor for the week ending August 29. Pandemic Unemployment Assistance (PUA) claims rose significantly to 759,482. UI and PUA claims together have risen for the last four weeks in a row, largely driven by the increase in PUA claims.   On a seasonally-adjusted basis, 881,000 initial UI claims were filed. This is the first week using the Department of Labor's new seasonal adjustment methodology, meaning seasonally adjusted initial claims from before the week ending August 29 are not comparable. Moving forward, the gap between seasonally adjusted and non-seasonally adjusted data should be smaller and more accurate, though we plan to focus on the non-seasonally adjusted data to preserve comparability. *For more detail, please refer to our explainer at the bottom of this post. Continuing claims for UI fell to 13.1 million for the week ending August 22, on a non-seasonally adjusted basis. Continuing claims are also affected by the Department of Labor's new seasonal adjustment methodology, though starting from the week ending August 22 instead. Continuing claims present a more optimistic view of the labor market than other indicators, recovering much faster in August than July. UI claims over the next few weeks are likely to remain elevated due to several recent natural disasters, including the Iowa derecho event, California wildfires and Hurricanes Marco and Laura. Additionally, several prominent companies, including MGM, American Airlines, Delta, United and Ford, have announced large layoffs in the last few weeks which will also begin affecting claims data soon. The upcoming August jobs report will confirm whether the labor market is indeed settling into a slower rate of recovery. While UI claims have improved in fits and starts over the course of the crisis, they remain historically elevated and suggest that we may be in for slow but steady gains over the next few weeks. To speak with Daniel Zhao about today’s report or to discuss labor market trends, contact pr at Glassdoor dot com. For the latest economics and labor market updates, follow @danielbzhao on Twitter and subscribe to Glassdoor Economic Research.

*Why you should focus on the non-seasonally adjusted data

This week, the Department of Labor began using a new additive seasonal adjustment methodology that replaces their existing multiplicative approach. During an acute crisis, multiplicative seasonal adjustment can easily over- or understate claims by amplifying crisis-driven changes beyond normal seasonal trends. This can result in reported week-over-week changes being driven by the seasonal adjustment rather than real changes in the economy. The new additive methodology should help mitigate these problems. But the Department of Labor is not immediately releasing historical data using the new methodology, which means the seasonally adjusted data before September is not directly comparable. Moving forward, we plan to focus on the non-seasonally adjusted data, along with other media outlets like The New York Times, because the data will still be comparable before and after this methodology change, will better capture COVID-specific impacts and can incorporate PUA claims. Because many people are used to the seasonally adjusted data and because the new additively seasonally adjusted data will mitigate some issues, it will still be useful to discuss the seasonally adjusted data moving forward, but the non-seasonally adjusted data will be the most useful for understanding the actual state of the economy.

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