Jobless claims fall at a higher than expected rate
Photo: flickr via qnr
The Labor Department reported that new claims for unemployment fell to their lowest levels since September, 2008. The seasonally adjusted claims fell by 22,000 to 432,000 which represents a larger than expected drop. This bodes well for a long term recovery. New jobless claims fell for 17 straight weeks which is a great sign that economic recovery might actually spur new job creation soon. The hope is that newly employed people and those who held their jobs will have renewed confidence in the economy and begin pumping in more of their dollars to help snowball the economic momentum.
Lower four week average shows signs of improvement
Initial unemployment claims are tracked very closely by the Labor Department and analysts. These figures are gathered and analyzed weekly, but to give a bigger picture the highs and lows are averaged over four weeks. The latest average shows a drop in claims to 460,250 compared to the recession high 674,000 recorded last spring. The number of people dropped by almost 57,000 to 4.9 million. This drop was also better than what analysts had anticipated. The pace of the layoffs is more telling than the actual numbers. The number of people receiving unemployment is staying high, but the rate that jobs are being cut is slowing.
Federal claims curb some of the enthusiasm
The number of initial claims falling does not tell the whole story, however. States pay 26 weeks of unemployment usually and benefits beyond that come from the federal government. Some of the drop in the number of people receiving benefits represents a shift from the initial 26 week claims to the federally funded extended benefits. The number of people on extended benefits went up by almost 200,000 in the second week of December compared with the week before. This was in part due to Congress extending benefits in November. President Obama extended federal unemployment benefits through February, 2010. This move prevents 2 million people from running out of benefits in January, but a total of 3 million people will now run out of federal benefits by March of next year. It isn’t certain that benefits will be extended beyond March. The nature and speed of recovery at that time will have a lot to do with the decision of the fed.
Recovery not happening for everyone
The country is experiencing its worst recession in the past quarter century. Recovery has started in a general sense, but not universally. For instance, employers cut the least amount of jobs in November in over a year. 11,000. However, the number of new claims rose in Michigan by 8,362 primarily due to continued problems in the auto sector and Michigan’s difficulty diversifying its economy. Michigan isn’t alone. California, Florida, Iowa, and Missouri saw increases as well. Tennessee saw the largest decrease in claims – 2,972. Several other states experienced decreases as well. The unemployment statistics for December are due out January 08, 2010. Continued improvement will boost confidence over this year.
