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Rise in Initial Unemployment Claims Shows Lack of Economic Recovery
Unemployment sky-rocketed during the weeks preceding December 1, 2012 as the actual number of initial claims for unemployment compensation filed during the week ending December l, 200012 reached the astronomical figure, during a supposed economic recovery, of 498,619. As usual the media did not report the actual number of claims, but something they called the “seasonally adjusted” number of claims filed. I can think of no good reason for reporting the seasonally adjusted number of claims filed. Agricultural labor is seasonal; manufacturing items for sale at Christmas may be seasonal and falls in October and November; and retail trade, transport, and related activities rise in November and December. None of those are sufficient to account for the reported seasonal decrease of 25,000 in initial unemployment claims in the week ending December 1 when the actual increase in claims was 139,000.
Jack Welch, former head of GE, wrote a couple of months ago that the Department of Labor report on unemployment could not be trusted. Mark Thoma, writing in support of official statistics in The Fiscal Times, has this to say about official seasonally adjusted statistics:
Lastly, there is the problem of seasonal adjustment. The statistical agencies do a good job of adjusting for seasonal fluctuations, but seasonal patterns change over time and seasonal adjustments aren’t always perfect. These errors get smoothed out eventually, but problems with seasonal adjustment can distort the initial picture provided by the data.
This is a view I generally share. But the seasonal data reported for the week ending December 1is in my opinion not to be believed. Coupled with other data, last week’s report of GDP, which showed that private investment in plant and equipment for the third quarter of 2012 was stagnant, we are in for a recession whether or not we “go-over-the-cliff” or not. Growing investment in plant and equipment is a sine qua non for a genuine economic recovery. We are making no economic progress except for oil and natural gas and mobile phones and software and these cannot account for the decrease in seasonal unemployment claims. Investment in wind and solar energy during the past decade has not helped the economy but made it worse; it contributed to the massive budget deficit and to declining overall labor productivity because of its high cost.
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