Job Losses Settling At An Unhealthy Level

The level of weekly initial unemployment claims (WIUC) that defines the level between stagnant employment and significant jobs growth is around 400,000.  The boundary between stagnant employment and net job losses is considered to occur in the 450,000 to 475,000 area.

Earlier this year WIUC moved below 400,000 and this was hailed as the advent of a new healthier era for post recession employment.  But the healthier outlook came into question starting the second week in April as WIUC moved back above 400,000 and has stayed there for seven weeks now.  The reports have reached as high as 478,000 (April 30) and the less volatile 4-week moving average has had a high of 440,259 (May 14).

The following graph shows the discouraging trend for job losses, with an extrapolation indicating no year-over-year improvement possible by June or July.


One factor that shows a remarkable correlation to the job loss data is the rate stimulus expenditure, as shown in the following graph:


One of two things are suggested:

1.  The private sector is not creating enough employment opportunities to hold down jobs terminations.  If this is the case, then the recent jobs gains near 200,000 a month will start to decline.


2.  The private sector is creating more new jobs and the higher WIUC is simply reflecting employers exercising more willingness to replace employees with others that are now returning to the labour force.  If this is the case, 200,000 net jobs gains per month (or more) will continue.

The rate of creation and termination of jobs is reported by the U.S. Dept of labour JOLTS reports which run two months behind the WIUC and Monthly Employment Situation reports from the BLS.  In June and July we will see data from the JOLTS reports that will shed light on what has been happening in April and May.