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When initial claims, unemployment, and payroll employment clash

Not long ago, the FRED Blog discussed several details about the construction and interpretation of the data for initial weekly claims for unemployment benefits. As of May 30, FRED shows that the four-week moving average was 2.3 million new claims. Yet, the FRED graph above shows that for the entire month of May 2020, there was a decrease in the number of persons unemployed. And there was also a simultaneous increase in the level of payroll employment. How is all this possible?

First of all, data related to the labor market come from different sources: The U.S. Employment and Training Administration reports the number of initial weekly claims for unemployment benefits; and the U.S. Bureau of Labor Statistics, through the Current Employment Statistics (Establishment Survey), reports the payroll employment and unemployment figures.

Also, the data series have similar names but represent different concepts. Even if you file an initial claim for unemployment benefits, for example, it does not necessarily mean that you will be counted as unemployed.

Finally, keep in mind that changes in the number of persons listed on payrolls do not correspond to changes in the number of persons employed or unemployed. The FRED graph below shows that during May, June, July, and October of 2019 there were simultaneous increases in the level of payroll employment and increases in the number of persons unemployed.

How these graphs were created: Search for and select “All Employees, Total Nonfarm” anuse the “Edit Graph” menu to add two more lines: “Unemployment Level” and “Employment Level.” Next, change the units of any of the three series to “Change, Thousands of Persons” and click on “Copy to all.” Lastly, change the graph format to “Bar,” edit the colors to taste, and change the date range to match the time periods of each graph.

Suggested by Diego Mendez-Carbajo.

View on FRED, series used in this post: CE16OV, PAYEMS, UNEMPLOY


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