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 Richmans' Trade and Taxes Blog

Unemployment Claims Fell and Did Not Rise As Reported. Did the Misinformation Help Cause the Fall in the Stock Markets?
Raymond Richman, 8/18/2011

With stock markets in a free fall today, Thursday, 8-18-11, mostly as a result of concern about European banks, it was disconcerting to hear the unpleasant news on CNBC that claims for unemployment insurance in the U.S., seasonally adjusted, in the week ending Aug 13 rose to 408,000 up 9.000 from the week before. Seasonally adjusted figures are statistical estimates based on earlier “normal” years. There have been no recent “normal” years. In any case, the actual number of claims filed is more reliable and is not an estimate. The actual number of claims filed totaled 342,669 , a decrease of 11,739 from the actual number in the previous week. What a difference! Instead of an increase in claims which the seasonal adjustment estimated, the number of claims fell 3.3 percent. Moreover, in the comparable week a year ago, there were 405,484 initial claims filed. There was a reduction of  62,815 compared to a year ago. That was not the only good news. The unadjusted number for persons claiming UI benefits in state programs totaled 3,535,364, a decrease of 45,069 from the preceding week and 745,7 10 or 17.4 percent from the comparable week a year ago.

Would the U.S. markets have collapsed had the actual number of claims been reported by CNBC and Bloomberg and Fox business news?  No one knows but it is safe to say that it would have been more reassuring to investors and the short sellers would not have dominated the market as they did. Here is hoping that the news services will pick up this report and the markets will rally tomorrow.

Of course, these figures do not mean we are out of the woods but they do suggest that we are not heading into another recession. They suggest that we are in a period of slow growth or economic stagnation. As we have pointed out in these pages numerous times, there is a lot we can do to stimulate the economy.

Comment by Ken Hoop, 8/20/2011:

http://petemurphy.wordpress.com/2011/08/19/july-unemployment-at-worst-level-of-recession/

I'll go with Pete Murphy's analysis.

Response to this comment by ClydeB, 8/20/2011:
Pete Murphy has the best insight into the mess of anyone. I'll go with his analysis as well.

Response to this comment by Bruce Bishop, 8/22/2011:
I just visited Pete Murphy's blog.  He provides some interesting viewpoints that enrich the conversation.  He does identify the problem as being our trade imbalance.  While I have been fixated on China as the focus point, (Communist dictatatorship, slave labor, cheating at every turn, stealing our intellectual property, using our money to build up her military, likely enemy in the future), Mr. Murphy does point out that our per-capita deficit is much greater with other countries.  I haven't processed that yet, but he has obviously done some good research and his points are worth considering.  He also advocates "population control," which sounds like social engineering. Still, having read "Trading Away our Future," by the Drs. Richman who run this web site, I believe that they have taken the "balanced trade," solution to an actionable level.  The word "tariff," is still considered a "dirty word" in enough places to keep it off the table.  The Richman approach is similar to one proposed by Warren Buffett several years back, and I believe that it could get some traction as part of our fiscal healing process. Finally, in defense of "free trade," and the "free market," there are no other workable options.  I understand that the liberals have declared that "free trade," is causing our job loss, and that we must abandon "free trade."  Remember, liberals have always hated "free trade."  They prefer to live in a state-controlled economy, provided, of course, that they are running the state.  Please remember that the operative word in "free trade," is FREE.  Anything other than that means that "we the people" are not free.

Response to this comment by Ken Hoop, 8/22/2011:
Pat Buchanan is not a liberal (nor was the Perotista-populist movement) and the historic GOP was protectionist until perhaps the 1970s.

Response to this comment by maronn, 10/12/2012:
I have to do a report for our school magazine on this topic, and your blog has been beneficial. Can you please add more reference to this point, thanks.site  

Comment by Bruce Bishop, 8/22/2011:

As to the numbers, employment, unemployment, inflation, etc., I believe that everyone has an agenda.  Having an agenda means that everyone who publishes numbers of general interest is motivated to exaggerate the numbers, diminish the numbers or to publish the exact truth.  Our difficulty lies in trying to determine which is which.  We also have a tendency to prefer the numbers that conform to our pre-conceived notions.  We have a tendency to prefer the numbers that conform to what we would like them to be.  We have a tendency to prefer the numbers provided by our preferred providers.  That being said, I do not trust the numbers being dispensed by our government.  It's not that the bureaus who publish the numbers are dishonest (BLS for example,) it's just that they are sometimes fed bogus assumptions by politicians who don't know or don't care about the truth.

Response to this comment by Ken Hoop, 8/22/2011:
Another protectionist conservative is economist Ian Fletcher. "Free Trade Doesn't Work and What Should Replace it."    

Response to this comment by Raymond Richman, 8/23/2011:
I reported the actual unemployment claims last week to correct the impression that all of the media, including CNBC, Bloomberg, WS, NYTimes etc., etc. that uinemployment claims rose by 9,000 last week. That is the number that the BLS calculated as the seasonally adusted number. In normal years, the auto industry has lay-offs in July and August while they prepare for new models. When was the last normal year that we had. I do not believe we have had one in years. The BLS also published the actual number of initial claims for unemployment insurance which showed a DECREASE of 11,000 in inital claims. Neither figure is good but the latter figure is positive. The anouncement that initial claims rose 9,000 contributed together with the bad news from Europe with a drop in the DOW of over 400 points. I am in the midst of estimating what the most likely course will be and will put this on our blog when I finish. I have tentatively concluded that a sideways movement -- stagflation is more likely than a double dip. As my readers know, I believe we need to balalnce our trade not only with China, but with Japan and Germany and oil producing states utilizing our invention of the the single-country-scaled-tariff. Market forces won't do it. The scaled tariff can become the world's major instrument to achieve balanced trade. And as you know, the administration has been hostile to increasing production of fossil fuels which, the last time I looked, we were importing sixty percent of our needs. We have immense reserves in public lands (verboten!), offshore and in the arctic. Environmentalists who endorse the adminsitration's policy are trying to impede the production of natural gas extracted from shale. And the administration is doing its best to restrict the growth of private enterprise at home except for the inefficient, subsidized production of wind and solar energy. We need to change our policies to get real growth. 

Response to this comment by Raymond Richman, 8/23/2011:
I reported the actual unemployment claims last week to correct the impression that all of the media, including CNBC, Bloomberg, WS, NYTimes etc., etc. gave that uinemployment claims rose by 9,000 last week. That is the number that the BLS calculated as the seasonally adusted number. In normal years, the auto industry have lay-offs in July and August while they prepare for new models. When was the last normal year that we had? I do not believe we have had one in years. The BLS also published the actual number of initial claims for unemployment insurance which showed a DECREASE of 11,000 in inital claims. Neither figure is good but the latter figure is positive. The anouncement that initial claims rose 9,000 contributed together with the bad news from Europe to a drop in the DOW of over 400 points. I am in the midst of estimating what the most likely course will be for our economy and will put it on our blog when I finish. I have tentatively concluded that a sideways movement -- stagflation is more likely than a double dip. As my readers know, I believe we need to balalnce our trade, not only with China, but with Japan and Germany and oil producing states, utilizing our invention of the the single-country-scaled-tariff. Market forces won't do it. The scaled tariff can become the world's major instrument to achieve balanced trade. And as you know, the administration has been hostile to increasing production of fossil fuels which, the last time I looked, we were importing sixty percent of our needs. We have immense reserves in public lands (verboten!), offshore and in the arctic. Environmentalists who endorse the adminsitration's policy are trying to impede the production of natural gas extracted from shale. And the administration is doing its best to restrict the growth of private enterprise at home except for the inefficient, subsidized production of wind and solar energy. We need to change our policies to get real growth. 

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