With US initial unemployment insurance claims very much top of the market’s mind, here are 3 data points to consider:
#1: The headline number we all see every week is seasonally adjusted; this Thursday’s number will be 12% higher than actual claims filed, whatever those are.
- There is pronounced seasonality to the initial claims data through a typical year. They peak at the end of the Holiday season and trough in early September.
- The seasonal adjustors to accommodate this pattern are quite large.
For example, the week ending January 11th, 2020 saw 338,500 actual initial insurance claims filed but the reported number was just 207,000 because the seasonal adjustment factor for the week was 163.7.
Conversely, the week ending September 7th, 2019 had 160,342 new actual claims but the reported number was 208,000 because the adjustment factor was 77.0.
- The seasonal adjustment factor for the week ending March 21st, 2020 (this Thursday’s report) is 88.3, which means that the headline number reported will be 12% higher than the actual number of initial claims.
Takeaway: none of this minimizes the very real economic impact of COVID-19 on American workers, but we should shift our focus to actual claims filed over the coming weeks as well as actual continuing claims (also seasonally adjusted) rather than look at the headline numbers. Seasonality is irrelevant just now.
#2: Updating our work on the number of US Google searches for “Unemployment”:
First, here is the last 2 weeks:
And here is just the last 7 days:
Three things strike us about those graphics:
- The order of magnitude expressed by the first chart is 10x from Week 1 (ending March 13th) to Week 2 (ending the 20th). Since we know Week 1 was 250,000 new claims (not seasonally adjusted) we can assume the upcoming report will print around 2.5 million initial claims.
- This week is starting off at a new high for Google searches (the second chart), and at levels roughly 2x the prior week (the one ending March 13th). That equates to a run rate for this week of another 2.5 million initial claims.
- These are, of course, rough numbers but the general scale certainly seems correct and the 2.5 million number is spot-on economists’ estimates. Our work, based on just today’s data, says we may see a similar number next week.
#3: Closing out on a more upbeat note: Google searches for “bankruptcy” are not spiking yet.
Here is the last 2 weeks:
And just the last 7 days:
Three points about those graphs:
- The first one looks nothing like the 2-week “unemployment” Google Trends chart; it is quite flat and that’s great to see. Since Google is ubiquitous, we assume the search volumes related primarily to personal bankruptcy rather than the corporate variety.
- The second one does have some incremental volume today, but the #1 source of that interest is Washington DC. No doubt some of that comes from policymakers’ staffs trying to figure out what sort of bankruptcy relief/avoidance might be crafted into a stimulus plan.
- If you want to track COVID-19’s effect on the real economy, keep your eye on this Google Trend data. Back at the start of the Financial Crisis, “bankruptcy” searches started to increase in Q1 2008.
Summing up: the Google Trends data shows the initial COVID-19-related economic shock one would expect – higher unemployment – but this has not yet filtered through to outsized interest for “bankruptcy”. If the US Congress can pass a stimulus plan soon, we may be able to avoid forcing Americans to search for that particular term. But the clock is clearly ticking.