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Claims Continue to Rise, Due to Erroneous Adjustment Factors

July 30th, 2009 Michael McDonough

Initial Claims rose 25K to 584K, as the index continues to adjust for erroneous seasonal adjustment factors stemming from early auto plant closures.  The good news these askew effects have by now likely all been washed out, so we should once again be able to rely on claims as a reliable indicator.  On that note, this week’s claim number is still far below the 4wk moving average–from before the incorrect seasonal adjustments–, which in my view shows there has been some improvement in the initial claims data.  But, given the still elevated numbers it will continue to have an adverse effect on payroll data.  Finally, continuing claims declined for the third consecutive week reaching 6.197mn.

As an aside, I recently found a chart in US Today, which highlighted the anticipated GM plant closures along with the total number of employees effected (see below).  To that I added each states unemployment rate.  It was no surprise to find that most of the plants effected are located in states, which have unemployment rates well above the national average.  These economies will likely remain depressed for sometime and will continue to be impacted by the downturn in the auto sector.

(Source USA Today & BLS)
City Plant status Population GM workforce Unemploy. Rate
Pontiac, MI Closing by October (assembly) 66,095 1,470 15.2%
Spring Hill, TN On standby (assembly) 26,230 2,671 10.8%
Wilmington, DE Closing by end of July (assembly) 72,592 1,060 8.4%
Grand Rapids, MI Closed (stamping) 193,396 912 15.2%
Indianapolis , IN Closing by Dec. 2011 (stamping) 808,466 762 10.7%
Ontario, OH Closing by June 2010 (stamping) 5,200 860 11.1%
Livonia, MI Closing by June 2010 (engine) 91,220 118 15.2%
Flint, MI Closing by Dec. 2010 (components) 112,900 646 15.2%
Ypsilanti, MI Closing by Dec. 2010 (powertrain) 21,464 1,364 15.2%
Parma, OH Closing by Dec. 2010 (components) 77,947 1,026 11.1%
Fredericksburg, VA Closing by Dec. 2010 (components) 22,818 81 7.2%
Massena, NY Closed in May (castings) 10,539 35 8.7%
National 1,508,867 11,005 9.5%
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