Thursday, June 18, 2009

Claims in Michigan, Oklahoma, and Texas: guess who's seen the biggest surge?

In light of today's initial claims report (I refer you to Edward Harrison's, Credit Writedowns, detailed take on the report), I wanted to compare the state claims reports from three states: Oklahoma, Texas, and Michigan.

Why Oklahoma and Texas? Well, Oklahoma City, Oklahoma and McAllen, Texas were among the top three (one and two, actually) employment performers of all 100 metropolitan areas from Brookings MetroMonitor (see this post about the study of metropolitan areas). And Michigan, because that can serve as a proxy for the layoffs in the auto industry.

The chart illustrates the growth of average initial claims in 2009 over the average over 2007 and 2008 for each month through May (since the data is only available through June 6). Note: the data are not seasonally adjusted, and comparing the same month across years extracts the seasonalities. You can get state level data here.

I see two things in this chart. First, the layoffs in Michigan have perplexingly been less severe compared to those in Oklahoma and Texas. To be sure, the level of claims are larger in Michigan than in Texas and Oklahoma, but it is still striking that the surge has not been greater given the problems in the auto industry. Second, Oklahoma and Texas are showing a similar pattern to the national 4-week average - initial claims are receding - while Michigan is heating up.

The second point is important. Even though the auto industry is increasingly adding to the claims pool, the underlying trend is down.

Rebecca Wilder


  1. Weird. would it have anything to do with the union paying laid off workers for a while?

  2. Hi Aunt Jane,

    Your guess is as good as mine. I imagine, though, as long as one is considered "laid off", then he/she could claim benefits, even if compensation is still coming in.

    Good to hear from you - I guess that it is getting a little toasty in AZ right now.


  3. Dear Rebecca,

    Would you please comment on this edit?

    Do I have it right? That interest on excess reserves is costing ten times more than budgeted and much more than that in lost tax revenue because of damage to the commercial paper markets which have only been partly supplanted by TALF, and then only in the US?

    I would really appreciate the benefit of your experience in fact-checking this. Thank you.


    James Salsman

  4. Hi James,

    The author says:

    "0.25% simple interest on $800 billion is $2 billion, not $202 million as shown for 2009. But those expenditures pale in comparison to the lost tax revenues world-wide resulting from decreased economic activity from damage to the short-term commercial paper and associated credit markets."

    First, the $202 million was based on reserves in the range of $2 billion range rather than the current $840 billion. So the budget estimate to which they refer is misleading.

    Second, the short-term credit paper market should not be signaled out as the catalyst that decreased economic activity....a precipitous drop in aggregate demand (consumption plus investment plus net exports) did that on surging oil prices and tightening credit conditions.

    To be sure, the IOR policy does pale in comparison to the loss in revenues (which one can find also on the CBO's latest projection:

    Finally, I don't think that this is said in the article. But the IOR policy had already been in the works to be initiated in 2011.


  5. Thanks, Rebecca, your perspective is enlightening.

    Were the tightening credit conditions caused by the fact that banks took $800 billion from their operations and put it on deposits as reserves?

    Was the drop in consumption caused by the tightening credit, or the other way around?

  6. (Still very interested in the further answers to those questions, as time permits.)

  7. Hi James,

    Will you please contact me directly with your questions? I can better reply there.