Investing.com – Economists warned on Wednesday that fraudulent practices for obtaining state unemployment insurance benefits in Massachusetts could distort US weekly jobless claims data, making it difficult to get a clear picture of the labor market in the short term, according to Reuters.
An increase in applications in Massachusetts increased initial claims for unemployment benefits during the week ending May 6, pushing them to the highest level since October 30, 2021.
“We found that Massachusetts accounts for nearly all of the recent shift in the pace of weekly jobless claims reported nationally,” JPMorgan said in a note, citing its analysis of weekly jobless claims data.
“Furthermore, in the remaining 49 states, we see no signs of an unusually high number of claims recently, which would indicate that there is fraud affecting the data,” the bank added.
Since the claims data was released last Thursday, the Massachusetts Department of Unemployment Assistance has acknowledged that it is “seeing an increase in fraudulent claims activity where people try to access active UI (unemployment insurance) accounts or file new UI claims using stolen personal information so they can fraudulently obtaining unemployment benefits.
According to a JPMorgan analysis of weekly claims data, the unusual rise in claims from Massachusetts may have started earlier than the week ending May 6th.
The labor market is being watched closely for signs about the effects of the Fed’s fastest rate-raising campaign since the 1980s to tame inflation. Although it showed some signs of abating, the labor market remained tight, with 1.6 jobs per unemployed person in March. The unemployment rate reached its lowest level in 53 years, at 3.4%.
Bank of America (NYSE:BAC) also cautioned against relying too much on the recent jump in claims due to what is happening in Massachusetts. Claims from Massachusetts accounted for 45.6% of the increase in unadjusted claims in the week ending May 6th.
Bank of America noted that employment in Massachusetts accounted for less than 3% of private jobs in the United States, and initial jobless claims accounted for less than 3% of all claims in 328 of the 411 weeks from July 27, 2015, to May 6, 2023.
Initial claims increased by 22,000 to a seasonally adjusted 264,000 during the week ending May 6. Excluding Massachusetts, claims would have been 224,000, the highest level since mid-April, according to Bank of America.
Data due out Thursday is likely to show that initial claims fell by 10,000 to 254,000 compared to last week.
“However, we expect claims to gradually trend higher this year, consistent with our baseline expectation of further weakness in the labor market,” said JPMorgan (NYSE:JPM).
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