Wednesday, January 15, 2014

Population adjusted initial jobless claims and the unemployment rate: an update

 - by New Deal democrat

Occasionally over the last few years I have remarked upon the usually tight relationship between population-adjusted initial jobless claims and the unemployment rate. Overall the unemployment rate tends to follow the trend in the population-adjusted initial jobless claims with about a 6 to 12 month lag:

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Thus, while we can quarrel about the reasons, the fact that the unemployment rate has continued to drop sharply over the last year, following the trend in initial claims, was not unexpected.

With initial claims near historical lows as a share of population, the issue becomes whetherr the unemployment rate can fall much below 6%, or whether the gap that opened up in 2009 will ultimately be closed.

I anticipate that the unemployment rate will continue to fall, perhaps at a somewhat slower rate, to about 6%, but have a very difficult time declining meaningfully below that level.