As you have seen from the prior few posts, unemployment insurance claims (both initial and continued) are near record levels. What is very disturbing is that this is occuring at the same time the exhaustion rate of unemployment benefits hits record highs.
The way the Bureau of Labor Statistics calculates the exhaustion rate needs a little explanation. It takes a 12-month average of the number of final payments and divides that by a 12-month average of the number of first payments. The 12-month average period for which the first payments are counted lags the 12-month period for which the final payments are counted by 6 months. For example, the exhaustion rate for June 2008 equals the number of final payments from July 2007 through June 2008 divided by the number of first payments from January 2007 through December 2007.
The 12-month average period helps smooth out monthly bumps in the numbers. The lag helps ensure the data on persons exhausting their benefits is compared with the appropriate data from when they received their first payments (because it usually takes about 6 months to exhaust benefits). Without the lag, first time data could skew the exhaustion rate calculation. For example, a big decline in first time claims would make the exhaustion rate increase even if the number of persons exhausting their benefits that month didn’t change.
Data source:
U.S. Department of Labor
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