Jobless Claims Data Skewed Downward

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Published October 11, 2012

| FOXBusiness

A sharp drop in the number of weekly jobless claims filed last week was caused by the failure of one large state to report all of its claims, a Labor Department spokesman confirmed to FOX Business.

Initial jobless claims, which are a measure of the number of people recently laid off, fell by 30,000 to a seasonally adjusted 339,000, the lowest level in more than four years.

But the Labor Department spokesman said the numbers were skewed by one large state that underreported its data. The spokesman declined to identify the state, but economists believe California is the only state large enough to have such a significant impact on the overall numbers.

According to the spokesman, the reason that state’s claims numbers fell short was because the state left out a pile of unprocessed claims related to seasonal factors around the beginning of the fourth quarter, which began Oct. 1.

In a research note, Stephen Stanley of Pierpont Securities summed up the data: “In short, this reading is worthless in terms of informing on the general economy.”

It marked the second time in a week that key employment data have come under scrutiny for being possibly more encouraging than it actually is. On Friday, the Labor Department’s September jobs report said the unemployment rate had fallen to 7.8% from 8.1% a month earlier.

Coming a month ahead of the presidential election, some have suggested that the numbers are being manipulated for political purposes. Specifically, some supporters of Republican candidate Mitt Romney have accused the Obama Administration of doctoring the numbers to support President Obama’s re-election bid.

The White House and the Labor Department have denied the charges.

Because one state left out a chunk of its weekly reports from last week, the jobless claims numbers will likely be revised upward in the coming week.

The spokesman said the lack of reporting affected the season adjustment for the week, likely by about 30,000 fewer claims.

In addition, the spokesman explained to FOX Business that this large state has a history of reporting “volatile” numbers at the beginning of quarters and that the Labor Department has complained and tried to work with the state to more accurately report its claims but with little success.

“There is no explanation” for the volatility. “We have tried and tried to work with them. It’s like playing hardball with them,” the spokesman said.

The spokesman said that the unprocessed claims are likely to show up in the numbers in the next week or two. “We should see some sort of catch up.”

Later Thursday, another Labor Department spokesman issued a statement in effort to clarify what the agency described as “confusion” over the data. The latter statement seemed to refute the department’s earlier explanation.

“The decline in claims this week was driven by smaller than expected increases in most states and because of drops in claims in a number of states where we were expecting an increase,” the statement said. “No single state was responsible for the majority of the decline in initial unemployment insurance claims.”

In any event, economists had predicted claims would rise by about 370,000 last week. The four-week moving average of unemployment benefit claims, which is used to remove some of the volatility of weekly claims and is therefore a better gauge, fell to 364,000, the fewest since the week of March 31.

Stanley told MarketWatch it often benefits laid-off workers to “game the formula” by delaying filing for their unemployment claims. 

“As a result, there is an accumulation of claims that are likely submitted over a period of several weeks but not processed until the turn of the quarter. Apparently, the state in question (and it pretty much has to be California to account for anything close to 30,000) forgot to include that stockpile of unprocessed claims in their tally for this week (which is the first week of a new calendar quarter),” Stanley said.

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