Thursday, January 06, 2005

I finally got around last night to reading Peter Gosselin's excellent series on income instability in the Los Angeles Times. If you haven't read it, get to the Times web site and read it pronto.

The articles are chock full of very interesting facts and figures concerning the offloading of risk from capital and the state onto labor, at the same time that capital and the state have increased socio-economic risk in general through globalization. One tidbit of data jumped out at me and is especially important in light of today's jobless claims numbers and tomorrow's December employment numbers.
Government used to provide substantial help in coping with joblessness. In the mid-1970s, jobless workers could collect up to 15 months of unemployment compensation. By last December, Congress had pared the program to just six months. Additionally, federal legislation in 1978 and 1986 effectively reduced the value of benefits by making them taxable. And state eligibility restrictions imposed in the late 1970s and early '80s shrank the fraction of the workforce entitled to collect benefits from about one-half to a little more than one-third. Of the 8 million people who were unemployed last month, only 2.9 million were collecting benefits.
Now consider that information in light of news today that first-time unemployment insurance claims surged to an unexpected 364,000 last week.
First-time claims for U.S. unemployment benefits jumped by 43,000 to 364,000 last week, the highest since September, the Labor Department reported Thursday.

It was the biggest increase in nearly three years.

However, a Labor Department official once again encouraged users of the data to look at the less-volatile, more-informative four-week moving average of new claims, which rose by 750 to 333,000. . . .

Meanwhile, the number of ex-workers collecting unemployment checks rose by 61,000 to 2.84 million in the week ending Dec. 25, the highest since September.

The four-week average of continuing claims increased by 13,500 to 2.77 million, a six-week high.
Unemployment insurance claims are only the tip of the unemployment iceberg in the United States. Consider especially the use of temporary workers -- especially around Christmas -- who are not entitled to unemployment benefits. Consider also that
Long-term unemployment has been particularly insidious during this business cycle. In November, 1.74 million, or 21.7 percent, of the 8 million workers classified as unemployed had been out of work longer than six months. The average duration of unemployment remained high at 19.9 weeks.

About 40 percent of workers who collect benefits exhaust them before finding a new job.
For the past four Decembers there has been net job destruction, something that seasonal adjustment cleverly hides from our eyes. Moreover, ever since 1990 at least 2 million non-farm jobs have been eliminated in January, and since 1996, the minimum has been 2.5 million. Seasonal adjustment will sweep away the awful truth, but there are going to be a lot more real seasonally unadjusted unemployed workers in America in the weeks to come.

And if 364,000 seasonally-adjusted workers filed for unemployment benefits last week, rest assured that nearly 600,000 more are out there pounding the pavement with no check coming in the mail.

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