With the bitter mid-Atlantic storms now almost four weeks behind us, the impact of these storms on unemployment should be dramatically reversed. After all, if the rising unemployment in February came from the weather, as the Obama administration claimed two weeks ago, then new claims should have dropped rather significantly. Instead, the new figures today show that new claims only dropped by 5,000, with the rolling four-week average still 30,000 above the start of the year:
The number of newly laid-off workers requesting jobless benefits fell slightly last week for the third straight time. But initial claims remain above levels that would signal net job gains.
New claims for unemployment insurance fell 5,000 to a seasonally adjusted 457,000, the Labor Department said Thursday. That nearly matched analysts’ estimates of 455,000, according to Thomson Reuters.
The four-week average of jobless claims, which smooths out volatility, dropped to 471,250. Still, the average has risen by 30,000 since the start of this year. That’s raised concerns among economists that persistent unemployment could weaken the recovery.
The average number of weekly jobless claims remains above the 400,000-to-425,000 level that many economists say it must fall below before widespread new hiring is likely.
That last paragraph is far too optimistic. The number of claims generally has to drop to around 300,000-325,000 to indicate net job growth, or at least it did before the Obama era of economics. That’s because we need to see a positive net gain of 100,000 jobs a month just to keep up with population growth. Anything below that indicates expanding unemployment — as the Left constantly reminded us in 2003-4, when they accused the Bush administration of creating a “jobless recovery.”
Besides, even this rather optimistic take doesn’t account for the fact that 300,000 more were added to the chronically unemployed population:
In the Labor Department report, the number of people continuing to claim unemployment benefits rose slightly to 4.58 million. That was similar to what economists expected. But it doesn’t include millions of people who are receiving extended benefits for up to 73 extra weeks, on top of the 26 weeks customarily provided by the states.
More than 6 million people were on the extended benefit rolls for the week that ended Feb. 27, the latest data available. That is about 300,000 more than in the previous week. The total number of people receiving benefits now tops 11.2 million.
Over the past two months, “this measure has gone nowhere but up,” Dan Greenhaus, chief economic strategist at Miller Tabak, wrote in a note to clients. “We believe it will moderate through the spring, but the larger story, that people are simply not finding jobs, remains in place.”
But will it moderate in the spring? Last year, we repeatedly warned that the so-called “saved or created” jobs from Porkulus would disappear when federal block grants to states dried up. A CNBC report from ten days ago sends up another red flag:
State and local government payrolls typically don’t decline much until a year after the beginning of a recession because budgets are already in place and fairly inflexible.
As a result, payrolls were stable in 2008 and a good part of 2009. But not anymore. Revenue-starved states are taking more drastic steps to balance budgets.
“This is a completely unprecedented crisis,” says Ethan Pollack of the Economic Policy Institute. “The budget cuts are going to get more and more severe.”
The main trigger will be the winding down of the massive America Recovery and Reinvestment Act, better know as the federal stimulus plan. Tepid to modest economic growth will also hurt.
“A lot of states didn’t go through with the layoffs that were expected because of the stimulus,” says Christian Weller, who specializes in economics and public policy for the University of Massachusetts and the Center for American Progress.
Unless Congress passes another massive state bailout plan, these workers will soon find themselves out of jobs. In the end, Porkulus will have delayed the inevitable,with states finally reviewing spending and making cuts that should have occurred last year or before. Porkulus didn’t save or create jobs; it just kicked the can down the road on responsible governance at the state level.
The second half of this year threatens to see a major increase in unemployment, and that could be the final nail in the coffin for Obamanomics.