Published April 20, 2012
The Department of Labor has revised higher the number of people who filed for unemployment benefits for the first time in 58 out of the last 59 weeks.
The same has held true since the beginning of the year. There have been 14 weeks of jobless data this year, and there have been 14 revisions. And all 14 were revisions that made the claims picture higher than what the government originally reported.
Take a look at the most recent jobless claims data. The Labor Department said 386,000 new claims were filed last week, which is high, but it was at least down from the 388,000 the prior week.
But the prior week, claims were actually initially reported at 380,000. The problem is, Labor revised the prior week higher to 388,000, meaning the rise in unemployment claims this week, presto, became a drop.
And according to Labor Department data, initial jobless claims were understated by more than 100,000 since last November. Meaning, 100,000 more people actually had filed jobless claims than initially reported.
This is a very odd trend indeed; economists note it is not unusual for weekly jobless claims to be revised, as the government’s methodology for its initial estimate might not adequately take into account factors like seasonal adjustments or under-counting by states. But why are jobless claims now virtually always revised in the same direction -- higher?
Wall Street is beginning to be more skeptical. Economists have already warned that jobless claims data should be viewed over time to pick up on trends.
Nomura Global Economics has taken a look at the issue, too, and warns Wall Street to bet that the revised numbers will be skewed higher. It notes that the undistorted trend likely lies closer to 370,000 to 380,000.
However, week after week, Americans and elected officials are feeling more relaxed that the jobless data seem to be easing, that week-to-week comparisons show that more people are getting work and not getting welfare.
The unnerving trend of upward revisions paints a more dour picture of U.S. job growth, including data on the underemployed. Had the U.S. labor force participation rate stayed as it was, at 66% in 2008, and not dropped to 64% as it is now, unemployment would be above 10%, warned New York Federal Reserve head William Dudley in a recent speech. If the five million or so underemployed and those who have stopped looking for work come back in to the labor force, then the unemployment rate will rise.
The odd trend in higher jobless revisions are borne out in the data from the Labor Department going back to January (see chart). The skewed numbers have Wall Street trading desks increasingly distrustful, which may have an impact on how stocks are traded before, during and after the weekly data are released.
|DEPT. OF LABOR JOBLESS CLAIMS DATA REVISED HIGHER|
|(#s in 000s)|
|Week of||1st Reported||Revised Higher to|