Covid-19 Recession – Continued Improvement: The iM-Weekly Unemployment Monitor: Update 11/12/2020

Today’s DOL Unemployment Insurance indicates a continued improvement in the insured employment situation even though the initial claims remain high, but trending towards the long-term average.

The non-seasonal adjusted initial claims totaled 723,105, a decrease of 20,799 from the previous week. This makes up 0.49% of the Covered Employment. The 50-year long-term average (January 1971 to today) is 0.38% and the average of the last business cycle (July 2009 to March 2020) is 0.24%.

The non-seasonal adjusted continuous insured unemployment totaled 6,486,000, a decrease of 402,298 from the preceding week.

Also, total number of people claiming benefits in all programs for the week ending October 24 was 21,157,111, a decrease of 374,179 from the preceding week.

These reported numbers, which are graphed below, indicate:

1. A continued improvement in the return to work trend (continued decrease in the insured unemployed – green line) and the possible easing of the Covid-19 recession.
2. That the lowest unemployment rate should be 13.2% (blue line), and if one added the historic 2.6% UER-PCR spread, then the actual unemployment rate should be 15.8%.

In the current Covid-19 situation, we believe that the only meaningful figures from DOL’s weekly report are:

• The non-seasonal adjusted Insured Unemployed.
• The total of all persons claiming unemployment benefits in all programs, which includes persons receiving Covid-19 relief who would normally not fall into the insured employed, e.g. self-employed tech workers.

In the figure above, we graph the following:

• The monthly unemployment rate (UER) as published by the BLS, plotted 2 weeks earlier from the reporting date. (The May UER which is published beginning June is plotted from mid-May to mid-June.
• The insured unemployed rate (IUR) is the percentage of insured unemployed persons (not seasonally adjusted) of the labor force. (The number of insured unemployed is published every Thursday, looking back 2 weeks in the DOL’s weekly Unemployment Insurance Weekly Claims report. The labor force is published monthly by the BLS with the Employment Situation Summary.)
• The unemployed persons claiming rate (PCR) is the percentage of persons of the labor force claiming UI benefits in all programs, including the insured unemployed. (The total number of persons claiming benefit is published weekly looking three weeks back.)
• The spread UER-IUR, historically at 2.6% (2019 average).
• The spread UER-PCR, also historically at 2.6%, as the majority of persons claiming benefit were the insured unemployed.

A recovery would be indicated by the following:

• Significant and continuous decline in the insured unemployment rate
• Significant decline of total persons claiming benefit
• Spread UER-PCR approaching its historic value of 2.6%

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.