"Fuzzy Numbers” is one of the most popular video chapters
within The Crash Course. It explains many of the ways that
government statisticians routinely distort economic truth, making things seem
rosier than they are:
Please note that this is a non-partisan observation – every administration
since LBJ has perpetuated and expanded the practice of economic
self-delusion.
Debunking The Initial Jobs Claims Number
Today we’re going to solve the mystery of the low Initial Jobless Claims
number we've been seeing recently. It's not nearly as low as advertised once
you dig into the underlying 'fuzzy' math.
The 'Initial Jobless Claims' statistic measures the number of people
filing for unemployment benefits. If more people are filing, the number goes
up; presumably more people are losing their jobs and the employment rate is
falling.
Oppositely, if fewer claims are filed, fewer people are losing their jobs
and the employment rate is rising.
So low is good, and rising is bad.
According to government statistics, this number is now pegged at four
decade lows. Things haven’t been this good for the workforce in nearly 40
years!
As Zero Hedge recently reported, “Initial jobless claims remain stuck at
four decade lows (254k this week)... so where are all the jobs?”
(Source)
You’d think that with claims being at 40 year lows, there would be a
robust jobs market you could point to -- a lot of confident, happy workers
enjoying rising wages. And along with those rising wages we’d see rising tax
receipts.
But we're seeing none of these. So what gives?
The answer is once again found by digging into the "fuzzy numbers"
underlying the reported claims.
To understand the '40 year lows' statistic, all you really need to realize
is that the proportion of workers eligible to receive such
compensation is also at four decade lows:
SHARE OF UNEMPLOYED RECEIVING JOBLESS AID REMAINED AT
RECORD LOW IN 2015
Feb 9, 2016
[T]he majority of unemployed people in the United States don’t get UI
benefits. NELP called attention to the record-low recipiency rate for
calendar year 2014 in its report, The
Job Ahead. Using the latest data, we find that the
recipiency rate in 2015 remained at a record low, with just over one
in four jobless workers (27 percent) receiving UI benefits in 2015. Figure 1
below shows the national recipiency rate from 1972 through 2015, reported as
a 12-month moving average.
(Source)
Oh, the percentage of jobless workers receiving benefits (meaning
eligible for benefits) is at a four decade low? There! Mystery solved.
As the federal programs of jobless benefits wound down under Obama, the
proportion of people covered by Unemployment Insurance (UI) fell. So
the number of people eligible to receive benefits fell. And so the jobless
claims fell.
Therefore the falling Initial Claims statistic is really a measure of how
many fewer people today are eligible for benefits than compared to recent
prior periods. It says very little about the state of the job market
and whole lot about how crappy the recently created jobs have been (so bad
they don't elevate workers to the point of being eligible for to make a
jobless claim).
Just since 2011, the proportion of jobless workers receiving unemployment
insurance plunged from 67% to a measly 27%. From two thirds to just one in
four.
That’s a huge drop.
No wonder the Initial Jobless Claims are mired at four decade lows.
Once again, Fuzzy Numbers like this only require a tiny bit of sleuthing
to discover that they are abused to tell the tale that the politicians want
told. But these accounting distortions are increasingly in conflict with what
the rest of us observe with our own eyes on a daily basis.
This isn’t a robust jobs market, it’s the opposite. It’s thin and tenuous.
To try and square up the low Initial Jobless Claims number with your own
personal reality will only produce massive cognitive dissonance. Because the
claims number doesn't reflect reality; it's a manufactured fiction.
In the future, my advice is to trust yourself. Don’t trust the
headlines.
Lies lead to distortions, and those pile up. As I detail in my recent
criticism of the central planners behind it all, eventually there’s Hell to Pay.
~ Chris Martenson
