Jobless claims fall at a higher than expected rate
The numbers are starting to look better
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 looks good for the long term. New jobless claims have fallen for 17 straight weeks raising hopes that the economic recovery may soon actually create new jobs. The hope is that people just hired and those who kept their jobs will stay confident in the economy and anything they spent started putting more money into the economy, spurring momentum.
Lower four week average shows signs of improvement
Initial unemployment claims are tracked very closely by the Labor Department and analysts. These numbers are gathered and analyzed weekly, but to smooth out statistical highs and lows a four week average is used. The most recent average indicates a drop in claims from the high last spring of 674,000 to 460,250. Additionally, the number of people already receiving benefits dropped by 57,000 to 4.9 million. The drop was better than analysts had been thinking. The pace of layoffs is more telling to analysts than the actual numbers. The number of people on unemployment remains relatively high, but the pace at which jobs are being cut is definitely slowing.
Federal claims curb some of the enthusiasm
The number of initial claims falling does not tell the whole story, however. States pay for 26 weeks of unemployment typically and the extended benefits beyond that come from the federal government. Some of the drop of people receiving benefits means a shift from the initial claims for 26 weeks to extended benefits that are federally funded. The number of people receiving extended benefits rose by approximately 200,000 in the second week of December compared to the previous week. This was in part due to Congress extending benefits in November. The President extended federal unemployment benefits through February, 2010. This prevents 2 million people from running out of benefits in January, but 3 million will run out by March of 2010. It is not certain if benefits will be extended beyond March. The state and pace of the economic recovery at that time will have a lot to do with the fed’s decision.
Recovery not happening for everyone
The country is experiencing its worst recession in the past quarter century. The recovery is beginning to happen in general but not everywhere. 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. Other states saw decreases as well. Statistics for unemployment in December are due by January 8th, 2010. Continued improvement will boost confidence over this year.
