Tuesday, April 14, 2020

Huge initial jobless claims numbers point to massive 25,000,000 loss in April jobs report

 - by New Deal democrat

This is something I’ve been meaning to post since the last three weeks of huge, 3- and 6,000,000-plus numbers of initial jobless claims.

There is a general correlation between initial jobless claims and payrolls. Even in the best months, 1,000,000 total claims for initial benefits might be filed. But that is offset by 1,200,000 or more new hires for new jobs - I.e., for example, a net gain of 200,000 jobs during the month.

If we take the gain of roughly +.2% monthly in net jobs in a good jobs market, we can create a pretty decent historical correlation between the percent change in new jobless claims (blue, inverted in the graph below) and net jobs in the monthly payrolls report (red):

Noisy, but the correlation generally holds. Of course, the above graph stops before the month of March 2020, when all hell broke loose (and will make future historical graphing of initial claims and jobs a real challenge).

So here is the past year, through last week’s initial claims report:

The 4 week average of initial jobless claims suggests that the April jobs report is going to show something like a 25% loss in the entire jobs market! Since going into the crisis there were about 150,000,000 jobs in the US, a 25% loss equates to about -30,000,000 jobs.

Truly staggering.

P.S.: By the way, under any econometric election model you can find, such a loss if not quickly reversed portends disaster for the presidential candidate of the incumbent party.