The unemployment rate dropped from 8.4% in August 2020 to 7.9% in September.
Amongst the extremes we are seeing during the shutdown, that 0.5% drop is the smallest monthly decline since the peak in April.
(Cross post from my other blog, Attestation Update.)
Check out the extreme swings in the U-3 unemployment rate over the last 7 months:
The bad news on the economy called for the shutdown just keeps growing but there is a hint of good news in the near future.
First the good news.
9/30/20 – CNBC – US economy plunges 31.4% in the second quarter but a big rebound is expected – Commerce Department calculations of Gross Domestic Product (GDP) for the second quarter were revised, which is routine, dropping from an annualized contraction of 31.7% down just a little to 31.4% reduction in GDP.
The number of new claims for unemployment for week ending 9/26/20 has been about the same over the last five weeks, in the mid- to high 800 thousands. Last big drop was the week of 8/29/20. To again put this in context, before the government induced shutdown of the economy new claims averaged about 220,000 per week.
Good news is the number of continuing claims for unemployment is continuing to drop, which means that more people are going back to work than loosing their job.
The devastating impact of the economic shutdown continues to be painfully obvious.
New Graphs
Starting this week that way the information is presented for this ongoing analysis will be in graphs.
It is sad to personally observe the economic devastation from the shutdown.
We spent a few days in San Diego last week. Stayed at a hotel downtown near the harbor. Saw several things showing the severity of the economic damage.
Air travel
For quite a long time airplanes have not been allowed to leave San Diego International Airport until 6:30. It is funny to hear the first engine rev up a few seconds after 6:30 a.m.
I have noticed on previous vacations that there is a string of airplanes lined up ready to leave right at the stroke at 6:30. The planes take off approximately 1 minute apart.
We have been locked down long enough for the volume of statistics to build up to the point of allowing deeper analysis. As is always the case, the statistics can also be manipulated to give whatever answer you want. Deeper, honest analysis is starting to show surprising results, for example, the lack of correlation between infection rates and lockdown policies.
Surprising results on the low correlation will be mentioned after some game playing is described.
Wall Street Journal – /9/9/20 – The Sturgis Statistical Misfire – For this story remember the old saying
The annual motorcycle rally in Sturgis, South Dakota routinely draws huge numbers of people to the town, whose population is only 7,000 people. Attendance at the 10-day event this year was lower than usual with an estimated 460,000 motorcycle enthusiasts hanging around.
Frightening news reports at the time said this would cause massive numbers of Covid infections leading to massive numbers of deaths.
The comment that shutting down the economy represents a trade-off of lives versus jobs is an invalid comparison.
The real trade-off from a shutdown is lives versus lives.
People are dying because of the shutdown. The shutdown is killing people.
It is time to open the economy.
I don’t have time to summarize all the articles I have read making this point. Here are just three examples.
The pandemic is killing dementia patients
Washington Post – 9/16/20 – Pandemic isolation has killed thousands of Alzheimer’s patients while families watch from afar – The Washington Post, the Post, studied data from CDC to identify there have been 13,200 excess deaths from Alzheimer’s and dementia since the shutdown started. Excess deaths are the extra deaths over the number that would otherwise be expected because of some particular situation.
The number of new claims for unemployment for week ending 9/12/20 dropped a little, with “only” 860,000 people losing their jobs, down from an upwardly revised 893,000 the previous week. For contrast, before the government induced shutdown of the economy new claims averaged about 220,000 per week.
Better news in the data is the number of continuing claims for unemployment dropped about twice as much as the new claims, to 12.6M for the week ending 9/5/20. That is the lowest since the shutdown started.
CNBC report on 9/17/20 says Jobless claims were lower than expected but unemployment growth is still sluggish. The number of new claims was slightly better than the 875,000 which economists expected.
As I continue to sort out for myself what this means, will continue listing the stats I’m tracking.
The number of new claims for unemployment and number drawing unemployment is provided by Department of Labor. I calculated the net change, which I assume represents the number of new jobs, although it could also be that people dropping out of the job market wash into the new jobs number:
For the third time since start of the recession, the number of new claims for unemployment for the week ending 9/5/20 was below the 1,000,000 mark. For contrast, before the government induced shutdown of the economy, new claims averaged about 220,000 per week.
On the other hand, the number of new claims was flat for the week – the damage from the shutdown in terms of new claims did not go down.
As I continue to sort out for myself what this means, will keep listing the stats I’m tracking.
The number of new claims for unemployment and number drawing unemployment is provided by Department of Labor. I calculated the net change, which I assume represents the number of new jobs, although could also be that people dropping out of the job market could wash into that number:
After shooting from 3.4% in February to 14.7% in April, the headline unemployment rate has dropped to 8.4% in August.
You will interpret the statistics as you wish.
Looks to me like people are slowing getting back to work after the shock of the pandemic and follow-on government-ordered shutdown of the economy.
There are six different measures of unemployment, each providing a slightly different perspective. Put them all together for a more complex picture the economy.
At the top is a graph since 2007 of U-3, the headline statistic, along with U-6, the broadest stat which includes discouraged workers, marginally attached, and those working part time because they can’t find full time work.
For a closer picture, focus in on the stats since January 2019:
Over the last several weeks I have accumulated a number of articles describing the economic and health damage caused by the government ordered shutdown of the economy.
I’ve been wanting to post these for a while. In light of the California government imposing more severe constraints on when the economy will be allowed to start functioning again, it is now time to publish.
Economic damage
7/30/20 – Wall Street Journal – US Economy Contracted at Record Rate last Quarter; Jobless Claims Rise to 1.43 million – The preliminary estimate of the collapse in the US economy for the second quarter came in at an annualized 32.9% drop. Again, that is annualized. In addition, it will be revised in each of the next two months as additional data is gathered by the feds.
That follows an annualized drop of 5% in the first quarter.
8/25/20 – CNBC – American Airlines to cut 19,000 jobs when federal aid expires in October – (more…)
For the first time since 4/4/20, the number of new claims for unemployment increased for the 8/15/20 reporting date. Oddly, the increase of 109K is small for the time of pandemic but would be equal to about 4 weeks of new claims before the pandemic hit.
As I continue to sort out what this means, I’ll continue giving the same stats as provided for recent weeks.
Since the middle of June, which is when I started tracking this metric, the number of new jobs has exceeded the newly lost jobs by 5 million.
Looks to me like these stats suggest the economy is recovery, but at a slow pace, with unprecedented numbers of people still out of work at the same time as an extremely high number of new claims for unemployment are still rolling in.
The number of people drawing unemployment the number of new claims, and the resulting number of new jobs:
For the first time since 4/4/20, the number of new claims for unemployment increased for the week. Oddly, the increase of 109K is small for the time of pandemic, it would be equal to about 4 weeks of new claims before the pandemic hit.
As I continue to sort out what this means, I’ll continue giving the same stats as provided for recent weeks.
The number of people drawing unemployment the number of new claims, and the resulting number of new jobs:
We are a week into our second shutdown here in California.
Restaurants may only provide food to-go or for outdoor dining. The outdoor dining option only helps restaurants stay in business if they have enough outdoor patio space to have enough tables to provide enough customers to stay in business and then only if the temperature (during July and August) is tolerable.
Churches are prohibited from having worship services inside. Churches who are rich enough to have lots of outdoor space to sit in and well off enough to afford two sets of audio equipment can worship live. The first amendment has been partially suspended again.
Gyms, salons, and bars are closed.
On 7/14/20, the Wall Street Journal also explained the issue in a short editorial: California’s Second Shutdown.
The core issue:
A lockdown will cause more harm (economically, socially, psychologically, educationally, and emotionally) than the pandemic will cause.
I’ve been scratching my head for a long time wondering how the tally of new unemployment claims can continue at skyhigh catastrophe levels while the unemployment rate has not gone vastly higher than it already has.
Head scratching from another direction – Number of new claims is steady at a level that is at least six times higher than it was right before the pandemic started yet the number of people drawing unemployment is declining.
How can that be?
Think I have finally sorted out the answer after several weeks of looking at additional data:
To get to this point for yourself, compare the number of people drawing unemployment with the change from week to week, add in the number of new unemployment claims, and then plug the difference as people who have gone back to work meaning they have found a job. It is too early for people to dropping off unemployment because their allowed weeks gas run out so the change in people drawing unemployment has to be new jobs. Let me know if I missed something in this concept.
Here is my analysis of the number of people drawing unemployment, the number of new claims, and the resulting number of new jobs:
| week | new | back to | # drawing |
| ended | claims | work | unempl. |
| 6/13/2020 | 1.54 | 20.29 | |
| 6/20/2020 | 1.48 | 2.54 | 19.23 |
| 6/27/2020 | 1.41 | 1.88 | 18.76 |
| 7/4/2020 | 1.31 | 2.31 | 17.76 |
| 7/11/2020 | 1.30 | 1.72 | 17.34 |
Data source
Weekly press release from the Department of labor: Unemployment insurance weekly claims
Number of people drawing unemployment
Here is the weekly tally of people drawing unemployment, which is revised in the subsequent week:
Wow, I sure don’t understand what is happening. The headline unemployment rate declined 2.2% in June. That is a big drop.
At the same time, new claims for unemployment were 6.01 million for the four weeks ending 6/27/20. See previous post: New unemployment claims barely decline in week ending 6/27/20.
(How to put that information together? Well, the reason I’m blogging is to put my thoughts into writing, which forces me to think deeper in order to sort out what is going on around me.)
The U-3 unemployment rate in last four months with change from previous month:
| march | 4.4 | |
| april | 14.7 | 10.3 |
| may | 13.3 | (1.4) |
| june | 11.1 | (2.2) |
That is a 2.6% drop in two months after a 10.3% rise in April.
Wow.
Graph above shows key unemployment rates since the start of 2019.
This discussion will be posted at several of my blogs.
For longer term perspective, consider the rates since before the Great Recession:
