DOL Says 1 Million More Applied for Unemployment, Announces Changes in How Numbers Will Be Counted

By:
Chris Gaetano
Published Date:
Aug 27, 2020
The U.S. Department of Labor said that 1.006 million people applied for initial unemployment claims last week, slightly lower than the previous week. New York state ranked a distant second in new claims, its 63,113 more than three times lower than California's 209,516. Overall, there remain about 28 million people nationwide still drawing on unemployment benefits in all state and federal programs.

The DOL also announced that, starting on Sept. 3, it will be calculating unemployment data to "reflect additive factors as opposed to multiplicative factors." The difference between the two is subtle but significant. A multiplicative time series involves the components multiplied together, and so individual differences can affect the entire series; an additive time series adds the components together, so each change is distinct. In general, one chooses a multiplicative model when the magnitude of the seasonal pattern in the data depends on the magnitude of the data; in such cases, the magnitude of the seasonal pattern increases as the data values increase, and decreases as the data values decrease. Conversely, one chooses an additive model when the magnitude of the seasonal pattern in the data does not depend on the magnitude of the data; in these cases, the magnitude of the seasonal pattern does not change as the series goes up or down.

The DOL said that the multiplicative model is better in times of relative economic stability, but that in times like this, it believes that the additive model will give a better indication of where things are.

"In the presence of a large level shift in a time series, multiplicative seasonal adjustment factors can result in systematic over- or under-adjustment of the series; in such cases, additive seasonal adjustment factors are preferred since they tend to more accurately track seasonal fluctuations in the series and have smaller revisions," said the DOL release.

Because the amplitude has greater ranges in the multiplicative model compared to the additive one, the overall effect of this change will likely be smaller unemployment figures coming from the DOL in the near-term future.

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