Surge in U.S. jobless claims could be wiped away after fraud is uncovered

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A seemingly steady rise in U.S. layoffs since March could eventually be wiped away after Massachusetts lowers its estimate of jobless claims to reflect a recent rash of fraud.

The number of people filing applications for unemployment benefits appeared to rise in the past few months, suggesting the labor market was cooling and that businesses were more willing to lay off workers. The rise in claims has also been taken as a sign by Wall Street

that the economy was slowing down.

New applications for unemployment benefits jumped to a 20-month high of 264,000 in early May from just 221,000 in late February, based on seasonally adjusted numbers.

Yet much of the increase seems to have stemmed from a huge surge in fraudulent unemployment filings in Massachusetts. New jobless claims in the state jumped to as high as 35,000 in early May from around 7,000 a week in January and February.

The state has since moved more aggressively to cull out fraudulent claims, with reported filings falling to around 21,000 last week.

Even that number appears far too high. One year ago, new jobless claims in Massachusetts were in the low 4,000s.

What’s more, the state’s unemployment rate has continued to decline in the past year. It fell to a post-pandemic low of 3.3% in April from 3.7% in May 2022.

Massachusetts has acknowledged the spate of fraud and says it’s working to address the problem. Most of the fraudulent claims are tied to perpetrators using “personal information stolen in national data breaches,” the state said.

Massachusetts will amend previous jobless claims reports to weed out fraudulent filings, said spokesman Matthew Kitsos of the state’s Executive Office of Labor and Workforce Development.

The revised Massachusetts figures could reduce overall U.S. jobless claims for the weeks of May 6 and May 13 if the state submits the corrected data in time, a U.S. Labor Department spokesman said.

Yet changes to any weeks prior to May would have to wait until March 2024, when Labor conducts is annual revisions of the jobless-claims data.

Economists estimate fraud in Massachusetts has inflated seasonally adjusted U.S. jobless claims by 10,000 to 20,000 a week.

The jobless claims reports have been harder to decipher over the past year.

The government’s annual update in March, for example, showed that new jobless claims were notably higher early in the year than previously reported. Earlier reports appeared to miss a big increase in high-tech layoffs on the West Coast.

Yet the actual, or unadjusted, number of unemployment filings has hardly budged in 2023, noted chief economist Richard Moody of Regions Financial.

They’re still extremely low — averaging around 220,000 a week — and show little deterioration in the strongest labor market in decades.


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