Decline in regional new unemployment claims reflects a lack of job separations

The region's labor market remains healthy, despite some stats suggesting otherwise

It’s a slow beginning of the week for economic data – eyes are on Thursday’s CPI (inflation) numbers, which will include September statistics for the Inland Empire. I’ll try to have something written about that for Friday’s post. There will be a lot of things to track since the last reading from July – two examples being rent/car prices as well as the region’s overall inflation ranking against other metro areas.

For today, I’ve tracked data on new claims for unemployment insurance and they continue to show little signs of change, even as the (non-seasonally adjusted) unemployment rate ticked up slightly in August.

For example, in San Bernardino County, the four-week average on new claims for the week ending on October 1 was down 2.3%, to 2,125 new claims total. We saw similar declines (3-4%) in new claims across Southern California metro areas, and the pattern of declining claims over time is certainly a constant in the region (see charts below and above).

There is a bit of a puzzle here: how can the unemployment rate go up but the number of new claims of unemployment insurance go down?

While I am not 100% certain of the answer, both statistics could have to do with workers restarting the search for work after a period of being out of the labor force. New claims for unemployment insurance are generated by layoffs, not re-entrants into the labor force, so the decline in new claims reflects a lack of job separations. On the other hand, the increase in the unemployment rate reflects people who were looking for work, but who are now back “in the labor market” for whatever reason, searching for work but not yet finding it.