Pink-Slipped

Aficionados of my previous finance blog (http://www.charleston.net/blogs/real_money) will be well aware that I’m not a fan of some of the massaging the government does with its economic statistics, especially seasonal adjustments. I would much rather have real numbers than imaginary ones, and let me take the seasonal factors into account for myself, thank you very much.

Today’s 443-point drop in the Dow Jones Industrial Average is being attributed mainly to very weak October retail sales and gloomy earnings reports and forecasts. All of which is logical. But the decline is being said to have occurred “despite a decline in jobless claims.”

Well, no.

It’s true that the Bureau of Labor Statistics reported today that initial claims for unemployment insurance benefits fell 4,000 in the week ended Nov. 1 from the previous week – on a seasonally adjusted basis. But on a real basis – that is, based on the actual number of filings with state employment agencies – initial filings rose 3 percent.

Here’s the real picture, and it isn’t pretty:



(Click to enlarge)

What the chart shows is total claims for unemployment insurance benefits (that is, initial claims plus continued claims) this year to date vs. last year and vs. the average for the same week for the previous four decades. As is pretty obvious, this year is looking awful. In the latest week, ended Oct. 25 (continued claims are reported a week behind initial claims for some reason), total claims amounted to 3.77 million, the highest number for that week since 1982 and 1.2 million, or 47 percent, higher than the same week last year.

Another way of looking at it: Through the week ended Nov. 1 this year, 16.1 million Americans had filed initial claims for unemployment insurance benefits, 3 million more than in the same period last year, a 23 percent increase. In other words, layoffs this year are running about a fourth higher than last year, which already wasn’t exactly a great year.

So it shouldn’t come as a total surprise that retail sales are down, or that corporate earnings in general are down. The bean-counters at those corporations have prettied up their income statements by cutting costs – i.e., jobs – and the result is that sales have also fallen because those job cuts have led to less buying power on the part of consumers. This is pretty typical of the downside of every economic cycle, but that doesn’t make it any less illogical and self-defeating, nor does it lessen the pain of those people who’ve been tossed out.

Have any of the billions upon billions of our dollars that have been shoveled out to Wall Street and Detroit done any good for the average American? Not yet, obviously.