Thursday, July 31, 2014

July 2014 Employment Preview

I don't have a lot of detail to post about this month's employment report.  As I've mentioned, the insured unemployment rate has continued to decline along with initial unemployment claims.  The oldest post-EUI unemployment cohorts are now past 26 weeks, so the improvements in insured unemployment should have a positive effect over and above any continued improvements in unemployment coming from the end of EUI and the continuing slow decline of very long term unemployed workers.

Here is a simple model of unemployment, based on the long term linear relationship between the unemployment rate and the insured unemployment rate, with a trend built in for very long term unemployed.  This suggests an unemployment rate of about 5.9%, with an expected range of about 5.7-6.1%.  Consensus is being reported at 6.1%.  I think this could be another month with a surprise gap down.

The final data point is projected.  Remaining points are historical. 
Here is the other graph I have been posting with total unemployment and insured unemployment.  There have been some recent stories that suggest the former EUI recipients have been coming back into the labor force in a healthy way.  As I've mentioned, much of the long duration unemployed had timed out of EUI and the behavior of those still on EUI had become much more normal than it had been early in the program, since labor markets in general are more normal.  So this is only half the story of long duration unemployment.  But, it is good to see the pattern start to be confirmed.  I think another part of the story that probably caused the EUI debate to lose steam is the trend that I have seen where the short duration unemployed started exiting unemployment faster after the end of EUI, so states have probably been seeing many fewer unemployed workers becoming newly eligible for an EUI program.

EUI was passed, almost unanimously, and signed by President Bush, in June 2008.  It was by far the most aggressive and generous EUI program in US history.  It baffles me that in July 2014, after having been passed with broad bi-partisan votes, it is being used as a political cudgel when the portion of the unemployment rolls that it would apply to is completely recovered.  Even as far back as December, very short term unemployment hit an all time record low.    I trust The People's Romance will soldier on.

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