The Weekly Unemployment Claims Number Shows Continuing Problems in the Job Market

• Author: Monica Jackson
• Posted: 2024-10-28

Last month, many celebrated the unemployment figures that showed the jobless rate exceeded 13% as a breakthrough. However, the topline number was somewhat misleading due to the way that it was calculated, leading experts to conclude that the number was lower than the true jobless rate. Now, for the 14th week in a row, more than a million Americans filed new unemployment claims. As a result, the job market has become much worse than the one during the depths of the Great Recession, and the V-shaped recovery that was promised does not seem that it will materialize.

The guts of the May jobs report revealed that the spiking of the football to celebrate an economic recovery was premature. The Bureau of Labor Management has conceded that it made an error in reporting on the number of employed people in the U.S. BLM counted 4.9 million workers who were temporarily laid off as employed. This alone would increase the unemployment rate by several percentage points.

Jobs Are Still Going Away, Even as the Country Reopens

The conditions on the ground can be judged by the number of new weekly claims. This represents Americans who have actually lost their jobs. While some of the new filings may represent people who have been trying to file in previous weeks but were not able to access the system, most are people who have recently been laid off from their positions. Some businesses are reopening, only to find out that sales have been permanently cut. As a result, they have needed to slash workers. Other jobs simply will not come back because they are no longer needed.

Experts would ordinarily think that people going back to work would cause the number of new unemployment claims to fall faster than they have. However, the economy is not nearly close to recovering in light of a spike in the number of COVID-19 cases. Businesses only hire when they are confident in economic conditions, and they are still far from operating at capacity. To put it in perspective, even when the economy recovers three-quarters of what it lost during the shutdown, it would still be at an 8% negative growth year-over-year. This is far worse than the depths of the Great Recession.

The fact that the job market appears a way off from recovering is worrisome for the long-term strength of the economy. Many would have expected that these numbers would have fallen below one million at this point of the reopening process. The stubbornly high number has been a sign that things are a long way from being right.

The Unemployment Numbers Are Open to Two Different Interpretations

There are two different ways to interpret the weekly jobless number. One can use the high average of weekly claims to argue that the jobless rate in the economy is much higher than was reported in early June. On the other hand, one can look at the number of Americans that were reported to be working and say that there is something wrong with the weekly jobless claims. In other words, when one looks at the sum total of jobless claims since the start of the pandemic, they are still too high to match reality. The sum total of people who have filed first-time claims for unemployment has exceeded 40 million, a number that far exceeds the unemployment rate and the actual conditions.

There is another explanation that some experts have advanced for the stubbornly high rate of new jobless claims that is more benign than the continued economic distress theory. Some have advanced the rosier view that states are counting claimants numerous times when they report the numbers to the BLM. The weekly claims number is a compilation of reports from each of the states. However, many states experienced system failures and chaos as their unemployment systems were not built to process claims at the rate that they were filed. As a result, some think that when the state systems began to dig out from their huge backlog of filings, that they double-counted many unemployment filers.

The coming July employment report will give a more accurate and current window into where the U.S. economy stands. It should help settle the debate about whether the June report was an overly rosy picture buttressed by a counting error or whether it shows the start of the country's economic recovery from the pandemic.