UBS on Initial Claims

December 26th, 2008 10:16 pm | by John Jansen |

Initial jobless claims have been hitting multi decade highs as the recession deepens. Economists at UBS make the point that with the expansion in the labor force claims would need to average about one million per week to equate to the weakness evident in the Reagan/Volcker recession of the early 80s. Here is an excerpt from their note:

Jobless claims rose to 586k from 556k; the 4-week average rose to 558k from 544k. The latest reading is the highest since 1982, but the labor force has grown 53% since then. Relative to the size of the labor force, the level of claims is at its highest since 1992. In 1982, new claims reached 695k, with the 4-week average peaking at 674k; claims would need to reach just over 1 million per week now to be comparable to that level relative to the size of the labor forcethat is highly unlikely in our view, just as we expect the unemployment rate to peak at a significantly lower level in this cycle than in 1982 (8.3% vs 10.8% in 1982).

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  1. 5 Responses to “UBS on Initial Claims”

  2. By pwm76 on Dec 27, 2008 | Reply

    I believe it matters which definition of unemployment you look at. U6 is broader than U3 and tells a different picture. Remember also that “discouraged” workers were removed from U6 during the Clinton administration, and that the number of “discouraged” workers has been increasing significantly. You’ll have to reconstruct the numbers to make sure you are comparing apples to apples. I’ve used Shadow Government Statistic’s broad measure of unemployment as a proxy in the past. This is proprietary content, but a shortened data series is here:

  3. By Tom Lindmark on Dec 27, 2008 | Reply

    Thank you for weighing in with this clarification. I have been arguing for some time that this has been missing from lots of analyses. I wrote this about a week ago. Not trying to promote my site but it has a link to Calculated Risk that made the same point about normalizing for population.

  4. By Dave in SV on Dec 29, 2008 | Reply

    I am so far from being an economist that I hesitate to even post my thoughts on the UBS data. But here is my 2 cents. To me, it seems like the article is saying, (paraphrasing) “apples to apples, the current recession is not as bad as the early 80’s once you normalize the data. But my reply would be that 30 years ago the supply chain was not using EMS/CM like they are today and information technology was not as developed/deployed in the business environment as it is today. The effect of IT and CM over the last 30 years has been to have a more efficient and smaller work force, hence why the unemployment numbers have not been as high in today’s recession as the early 80’s. Given these changes over the last 30 years, in my opinion, it makes the current unemployment numbers WORSE than what was happening in the early 80’s.

  5. By John Jansen on Dec 29, 2008 | Reply


    Great point. I will see if I can get a response from the economist I know at UBS. I suspect we may have to wait until the calendar page reads 2009,however.

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