Unemployment Going Down yet Unemployment Insurance Payouts at Record High in March 2010? The Misleading Government Metrics of Unemployment Insurance. Extended Benefits Highlight a Shadow Market of Unemployed.
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In March the Treasury reported a record amount of unemployment insurance being paid out. $15.4 billion was paid out yet claims have been falling since June of 2009. What gives? Well a large number of people are being shifted into EUC programs that are extended versions of unemployment insurance yet this data isn’t reported when we hear about the weekly unemployment claims that measure new people filing for claims. Yet this is misleading because we have a large number of people that are remaining on unemployment for record amounts of time because they are unable to find work in the current economy. Yet every week like clockwork, any slight “improvement” in the weekly claims is enough to cause a stock market rally.
The numbers break down as follows:
Source: U.S. Treasury
The only way more can be going out is if we are increasing benefit payouts (unlikely) or from a more likely scenario, we have an enormous group that is in the EUC category for long durations. Zero Hedge posted a chart highlighting this trend:
Source: Zero Hedge
What is clear from the chart above is that initial plus continuing claims have fallen steadily for almost a year. Yet monthly payouts are at a record high. There is a discrepancy somewhere along the lines. But when the EUC is combined we see what is really happening:
Source: Zero Hedge
A large number of Americans are entering into a shadow unemployment market. Like the shadow inventory in housing, the headline number does not give the full depth of the story. This recession has caused many Americans to be without jobs for record amounts of time:
The longer you go without a job, the harder it becomes to find a job. Chances are that many that have lost jobs in construction, finance, and other industries related to the credit bubble will be unable to find jobs in the new adjusted economy. So these people will need to retool. But retool for what? That is the real question. We have crushed the manufacturing sector of our economy:
So what we have are many Americans remaining on unemployment insurance unable to find jobs and being shifted to the EUC statistic (at least at the headline level) that isn’t reported on a weekly basis. So even though current and continuing claims look to stabilize, we have an enormous group that is part of the new unemployment insurance metric. The monthly payouts simply reflect this new reality. I highly doubt that people are getting bigger unemployment paychecks. These are typically capped at state levels and are based on wage scales so the more logical reason for record payouts involves longer term unemployed staying on UI for much longer periods of time. This is probably one of the better early indicators of any financial recovery should the amount being paid out decreases significantly.