By Paul Gomme and Peter Rupert
The labor market provides a scad of measures that are used to determine the state of the economy. The most common of these are the unemployment rate and payroll employment that are delivered monthly. On a weekly basis there is an indicator that counts the number of people applying for state unemployment insurance. The Department of Labor (DOL) announced that initial jobless claims sank to their lowest level since 1969: 187,000. Initial jobless claims (formally “initial claims”) count the number of unemployed individuals filing a first-time claim for unemployment insurance benefits after separating from an employer. Note, however, “separation” in the initial claims data isn’t neutral about cause. The general rule across states: to collect benefits, workers must be out of work through no fault of their own — layoffs and most non-misconduct firings clearly qualify. Those fired with cause do not quality. Voluntary quits are the opposite default: in every state, an employee who quits without good cause is not eligible for unemployment. So ordinary quits — leaving for a better job, personal preference, etc. — generally don’t generate an eligible claim and don’t show up in the initial claims count. Moreover, it is important to distinguish the number of people who are unemployed is substantially different from the people who claim unemployment insurance since many people who become unemployed do not qualify for unemployment insurance. As already discussed, those quitting their jobs generally do not quality. There are also work and wage criteria to quality for unemployment insurance; for example, an individual must have been employed for a certain number of weeks in the year leading up to an unemployment spell. And since unemployment insurance is a state-run program, there are differences in eligibtility criteria across states.
Once claims have been filed, the DOL tracks “continued claims,” or insured unemployment): people who already filed an initial claim, experienced a week of unemployment, and filed again to collect benefits for that week. The data are dated by the week of unemployment rather than the week the initial claim was filed, so they lag initial claims by one week in each release. Where initial claims measure the inflow into unemployment, continuing claims measure the stock. The stock itself provides one measure addressing how difficult it is to exit unemployment.
It is important to understand the distinction between continued claims and the stock of the unemployed. Many people who become unemployed do not quality for unemployment insurance (see the discussion above). And roughly half of those who do quality do not apply. Some choose not to apply because they feel they may not be unemployed for long; or they may experience stigma from receiving UI; or maybe they think applying is just a pain in the ass. In particular, the July 23 release showed that seasonally adjusted insured unemployment was 1,796,000 for the week ending July 11, down 2,000 from a downward-revised 1,798,000 and the four-week average at 1,805,250. The number of unemployed persons according to the household survey from the BLS was a seasonally adjusted 7,094,000 in June. In other words, only ¼ of unemployed people received unemployment insurance benefits.
