Jobless claims preview: Another 950,000 Americans likely filed new unemployment claims last week, as new counting method takes effect
Another 950,000 Americans likely filed for first-time unemployment insurance benefits last week, with the number of individuals newly put out of work during the pandemic remaining stubbornly high.
That expected sum would mark just the second time during the pandemic that new weekly jobless claims dipped below 1 million. Thursday’s report, however, will also mark the first time the US Department of Labor (DOL) counts new and continuing jobless claims under an updated system, with this change expected to lower the number of seasonally adjusted claims that get reported.
The DOL is set to release its report on weekly unemployment insurance claims Thursday at 8:30 a.m. ET. Here are the main metrics expected from the DOL’s report, compared to consensus estimates compiled by Bloomberg:
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Initial jobless claims, week ended Aug. 29: 950,000 expected, vs. 1.006 million during the previous week
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Continuing claims, week ended Aug. 22: 14.000 million expected, vs. 14.535 million during the previous week
Last week, the DOL announced that it would change the way it adjusts its initial and continuing jobless claims figures to account for seasonal effects, since layoffs over the past few months were inflated by the pandemic and broke from typical seasonal work patterns seen in years past.
Previously, seasonal adjustments were made on a multiplicative basis, in which the level of claims was multiplied by the expected percentage of increase or decrease that typically happened during a given week, due to seasonal workers starting or ending jobs. But with the new methodology, seasonal adjustments will instead be made on an additive basis, with the DOL adding or subtracting the seasonal changes rather than using a multiplication factor.
DOL said in a statement. “However, in the presence of a large level shift in a time series, multiplicative seasonal adjustment factors can result in systematic over- or under-adjustment of the series; in such cases, additive seasonal adjustment factors are preferred since they tend to more accurately track seasonal fluctuations in the series and have smaller revisions.”” data-reactid=”28″>“In times of relative economic stability, the multiplicative option is generally preferred over the additive option,” the DOL said in a statement. “However, in the presence of a large level shift in a time series, multiplicative seasonal adjustment factors can result in systematic over- or under-adjustment of the series; in such cases, additive seasonal adjustment factors are preferred since they tend to more accurately track seasonal fluctuations in the series and have smaller revisions.”
The change is expected to lead to fewer headline claims being reported than would have been under the previous method – and will mean that comparisons to previous weeks of headline seasonally adjusted initial and continuing unemployment filings will be useless. Naturally, unadjusted new claims will be unaffected and remain comparable over previous weeks and months.
“Because the swings in claims associated with COVID-19 clearly are not statistically seasonal in nature, we think the revised figures could make the updated seasonally adjusted data more in line with the NSA [not seasonally adjusted] data,” JPMorgan economist Daniel Silver said in a note. “Because the level of claims filings in recent months has been so high above the pre-virus norms, we think that multiplicative seasonal factors currently used by the Department of Labor may be leading to changes in the seasonally adjusted data that are not representative of economic developments.”
The update, however, will not change the overarching takeaway from the past months’ worth of reports: the joblessness driven by the pandemic is historic.
Since the pandemic took hold and drove new jobless claims above 1 million for the first time ever in mid-March, unadjusted and seasonally adjusted claims have mostly lined up at least directionally, with both surging in early spring before declining gradually in the months since. And both the unadjusted and seasonally adjusted figures for new jobless claims showed an unprecedented more than 50 million Americans filed new jobless claims between the week ended March 20 through the week ended August 22.
Given the changes, some economists instead suggest focusing on unadjusted data for the time being. UBS economist Seth Carpenter said he expects Thursday’s report will show unadjusted new claims stepped down slightly to 775,000 for the week ended August 29, compared to the nearly 822,000 reported in the prior week.
