Jobless claims rise again
posted at 10:55 am on October 22, 2009 by Ed Morrissey
Once again, initial jobless claims have “unexpectedly” risen after a few weeks of slight declines. The AP, among others, heralded the decrease from the 550K level to 520K as an indicator of economic recovery. They’re still sticking with that story, although it’s getting harder to justify it with claims increasing:
The number of newly laid-off workers filing claims for jobless benefits rose more than expected last week, after falling in five of the past six weeks, as employers remain reluctant to hire even with the economy showing signs of recovery.
The Labor Department said Thursday that new jobless claims rose to a seasonally adjusted 531,000 last week, from an upwardly revised 520,000 the previous week. Wall Street economists had expected only a slight increase, according to Thomson Reuters.
Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies’ willingness to hire new workers.
The four-week average of claims, which smooths out fluctuations, fell slightly to 532,250, the lowest since mid-January and about 125,000 below the peak for the recession, reached this spring. But claims remain well above the 325,000 that economists say is consistent with a healthy economy.
We need to keep in mind that unemployment is a lagging indicator of an economy. Firms shed jobs after the economy turns sour, not usually in anticipation of a downturn. They show reluctance to hire until employers start seeing increases in business to justify new positions. The economy will recover before we see a large number of new jobs lower the unemployment rate.
However, initial jobless claims in this stratospheric level indicate that firms are still shedding jobs, not just showing a reluctance to rehire. The number of unemployed people continue to rise, and many of them are now falling out the back end of the statistics, as the AP acknowledges:
When those [extended benefits] programs are included, the total number of recipients dropped to 8.8 million in the week ending Oct. 3, the latest data available, down about 50,000 from the previous week. That decline is likely due to recipients running out of benefits, rather than finding jobs, economists say.
As this demonstrates, the jobs lost are a cumulative total. Losing 214,000 jobs in September is not an improvement from earlier this year when we lost 700,000 jobs in a month, because those initial 700,000 jobs are still lost. It’s a reduction in the rate of disaster, which is better than losing jobs at the same rate, but that isn’t a realistic outcome anyway. The jobs lost at the beginning of the recession were the ones employers could afford to shed; the ones left now are existential jobs, where the employers either have to retain staff or close doors altogether.
As for the signs of economic recovery, there are a few, but none that come close to hitting home like unemployment. And it seems unlikely (although not impossible) that the economy grew at a 3% annual clip while shedding this many jobs in the third quarter.