The Growing Gap Between Jobless Claims and Job Losses

Just what does it say about the U.S. labor market? Here are a few ideas

By Jeffrey Sparshott

    People wait in line to attend a technology job fair in Los Angeles in January. Photo: Lucy Nicholson/Reuters

There is a growing gap between the number of workers losing their jobs and the number applying for unemployment benefits, and it’s not entirely clear why.

Layoffs have been stable since 2013. Claims have continued to drop.

“So there is something else putting downward pressure on claims,” said Heidi Shierholz, senior economist at the Economic Policy Institute, a left-leaning think tank.

That “something else” could be more than one thing, not all good—such as tenuous work arrangements or difficulty applying for benefits. A more positive explanation could include the relative ease of job-hopping in an expanding labor market.

The most recent data is particularly stunning. The number of U.S. workers filing for first-time unemployment benefits fell to the lowest level in 44 years for the week ended Feb. 25.

At a seasonally adjusted 223,000, initial jobless claims, often used as a proxy for layoffs, were the lowest since the final week of March 1973. And that’s when the U.S. labor force was a mere 89 million, about 44% smaller than in January.

The initial claims series is valued for its frequency, timeliness and relatively long history—it’s week-old data that reaches back to 1967, allowing historical comparisons through multiple economic cycles. The Job Openings and Labor Turnover Survey, by comparison, is only monthly, dates back to 2000 and lags claims by nearly two and a half months. A comparison of two series, however, shows a significant divergence.

The last time the unemployment rate was similar to today’s, in 2006 and 2007, roughly 76% to 78% of layoffs and discharges led to an unemployment claim. That fell to about 70% in 2016.

Ms. Shierholz surmises more people are falling through the cracks of the unemployment-insurance system, possibly because of more precarious work arrangements as contractors or temps, or difficulty applying to and qualifying for the state-run programs.

The National Employment Law Project, a nonprofit research and advocacy group, also has tracked the decline in unemployment claims.

“In general, we’re concerned that significant numbers of involuntarily unemployed workers are being prevented from receiving benefits to which they may be entitled, especially workers with labor market disadvantages like limited English proficiency, limited experience with computer technology, limited literacy,” said Claire McKenna, a senior policy analyst at NELP.

For example, states that shift to online claims filing from telephone filing may be locking out of the application process people who don’t have ready access to the Internet or the kind of documentation needed to qualify, she said.

Broader economic forces also could be at work. The share of people moving into jobs who had been out of the labor force—new entrants and reentrants—has passed prerecession levels. Such workers are often don’t qualify for benefits if they lose a job because they don’t have much of a work history.

Finally, many people may not bother to apply if they believe their prospects are bright.

Workers generally aren’t eligible for unemployment insurance if they quit a job. Nevertheless, the number of quits has surpassed prerecession highs as hiring remains brisk and wages show some signs of improvement.

That leaves most economists upbeat about the latest claims numbers, even with some caveats.

“The data are unambiguous evidence that the labor market in the U.S. continues to tighten,” said Rob Martin, economist at Barclays. “Workers are not being laid off in large numbers. The breadth of improvement across states indicates that this is a national phenomenon.”

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