Jobless Claims May Be Turning Into A Misleading Indicator

From now on, don't put too much credence in the weekly report on initial claims for unemployment insurance, warns economist Marlene Grabau of County NatWest/Washington Analysis. A change in the law is likely to cloud the significance of the numbers.

Specifically, recent legislation enacted to extend jobless benefits allows newly unemployed people to apply for either regular benefits or emergency benefits. "Because there are incentives for some persons to opt for emergency benefits," says Grabau, "we are likely to see continued declines in initial claims, along with a rise in emergency claims, which are reported separately."

The Labor Dept. says it's impossible to predict how the new legislation will affect the initial claims data. But because these data are a component of the index of leading indicators, the Commerce Dept., which produces the index, is now studying the issue. One possibility being weighed is to drop jobless claims temporarily from the index.

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