The good news is not only that new unemployment claims are
declining, but that economists are overstating the actual amount by over 20%.
Why? Misapplied seasonal adjustment (i.e., inflating coronavirus-caused
unemployment by adjustments meant for normal low unemployment summer season).
Here are the actual initial unemployment claims numbers:
Week ended July 18 – 1.38 M (media reported 1.42 M –
seasonal adjustment of +3.3%)
Week ended July 25 – 1.21 M (media reported 1.44 M –
seasonal adjustment of +18.9%)
Week ended August 1 (reported August 6) – 0.98 M (media
reported 1.19 M – seasonal adjustment of +20.5%)
Below are graphs showing the entire coronavirus period
The seasonal adjustment factors being applied in 2020 are
mistakenly based on normally much lower unemployment levels
The cumulative seasonal adjustments since the
coronavirus-caused unemployment started in mid-March now exceed 4 M
The cumulative initial claims overstate actual continuing
unemployment claims as the unemployed become employed again
The comparison shows the huge difference now between the
cumulative initial claims and the current continuing claimants
The best presentation for understanding the positive
dynamics at work. The green bars show the declining continuing claims, meaning
the number of workers no longer unemployed are growing, offsetting the new
claims being filed plus the decline in the continuing claims. Those that are no
longer unemployed are now more than twice the number still unemployed.
Last is the addition of the preliminary unemployment number
from the Bureau of Labor Statistics for mid-month July (reported August 7)
The bottom line
Yes, unemployment is still well above normal, but the
picture continues to improve. That improvement is part of what is behind the
stock market's rise. An additional factor is the widely reported seasonally
adjusted unemployment levels. The media’s large overstatement of the actual
levels has led to negative headlines when the news has been positive.
Thus, investing in stocks now remains a good strategy.
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