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Initial Unemployment Claims Fall as Sandy’s Impact Dissipates

First-time claims for unemployment insurance fell 23,000 to 393,000 for the week ending November 24, the ""Labor Department"":http://www.ows.doleta.gov/press/2012/112912.asp reported Thursday. Economists expected 390,000 initial claims filings.

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The previous week's report was revised upward to 416,000 from the originally reported 410,000.

Continuing claims--reported on a one-week lag--fell 70,000 to 3,287,000. The previous week's initial report of 3,337,000 continuing claims was revised upward to 3,357,000. The continuing claims report tracks the number of longer term unemployed who qualify for regular state jobless benefits.

First-time unemployment claims are gradually returning to pre-Sandy levels but remain elevated. In the four weeks prior to the storm that ravaged the East Coast, initial claims averaged about 369,000. Claims spiked to 451,000 in the week immediately following and have averaged 405,000 in the two weeks following.

On a longer-range trend basis, the four-week moving average of initial claims increased 7,500 to 405,250, and the four-week moving average of continuing claims rose 6,250 to 3,296,250.

The report was affected by the Thanksgiving-shortened week to the extent that government staff had four, not five days to process claims that had been submitted electronically, resulting in a processing backlog.

The drop in claims as some of the storm's impact recedes followed the pattern set by previous major storms. Initial claims returned to trend about a month after Hurricane Katrina’s arrival in 2005, but continuing claims remained elevated for nearly five months. The recovery from Hurricane Irene (2011) was faster, with continuing claims returning to trend in about a month.

The effect of Hurricane Isaac, which hit in August this year, was even more muted and quickly reversed: Claims rose 10,000 in the week following the storm and dropped 18,000 one week later. Isaac did not cause an increase in continuing claims, though it may have retarded the declines in continuing claims.

Because of the timing of the 2005 and 2011 storms--at the end of the month rather than mid-month, when data used to calculate the unemployment rate is measured--neither Katrina nor Irene had a significant impact on the unemployment rate.

Superstorm Sandy might, however, as continuing claims remain high. Individuals stop receiving benefits if those benefits expire or if they obtain jobs. Since those affected by Sandy are relatively new to unemployment rolls, and jobs are not returning as businesses remain shuttered, those collecting benefits as a result of the storm will bump up the unemployment rate or at least hold back any reduction in the rate.

This report on continuing claims covered the same week as the monthly employment situation report. From mid-October to mid-November, the number of continuing unemployment insurance claims jumped 25,000--the largest mid-month to mid-month increase since August. The unemployment rate that month fell to 8.1 percent from 8.3 percent, illustrating the perils of trying to forecast the unemployment rate from one data point.

While Sandy's impact on the unemployment rate could be muted, it might show up in the jobs count, a separate survey conducted by the Bureau of Labor Statistics (BLS). The BLS report for November, to be released on December 7, will include survey data received by Monday December 3. An individual who was paid for any part of the week including November 12 is counted as a job, but businesses shuttered by the storm may be too consumed by repairs to submit a voluntary response to the jobs survey.

The total number of people claiming benefits in all programs for the week ending November 10 was 5,182,815, a decrease of 58,623 from the previous week. There were 7,004,413 persons claiming benefits in all programs in the comparable week in 2011. Extended benefits were only available in New York during the week ending November 3.

According to the BLS, unemployment was 12,258,000 in October, which means that of those individuals counted as unemployed, 7.08 million were not receiving any form of government unemployment insurance, up from 7.02 million one week earlier.

States have been borrowing from the federal government to cover shortfalls in those funds which will eventually have to be repaid--unless Congress intervenes--with higher assessments on employers. Since those assessments are a percentage of payrolls, they discourage employers from adding new workers. As of November 26, 20 states have an aggregate $26.1 billion in outstanding loans to cover shortfalls, up from $25.9 billion one week earlier. Absent Congressional action, interest on those loans could lead to states increasing contribution rates required from employers.

The Labor Department said states reported 2,119,054 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending November 10, a decrease of 37,451 from the prior week. There were 2,972,894 persons claiming EUC in the comparable week in 2011.

According to the Labor Department detail (also reported on a one-week lag) the largest increases in initial claims for the week ending November 17 were in Florida (+1,534), Michigan (+1,427), Massachusetts (+1,189), Kentucky (+945), and Minnesota (+872), while the largest decreases were in New York (-30,603), California (-26,337), Pennsylvania (-11,451), Oregon (-1,997) and North Carolina (-1,851).

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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