Jobless claims fall at a higher than expected rate
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 have fallen for 17 straight weeks raising hopes that the economic recovery may soon actually create new jobs. 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 numbers are gathered and analyzed weekly, but to smooth out statistical highs and lows a four week average is used. The latest average shows a drop in claims to 460,250 compared to the recession high 674,000 recorded last spring. Additionally, the number of people already receiving benefits dropped by 57,000 to 4.9 million. This drop was also better than what analysts had anticipated. 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 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 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. 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 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 example, employers cut the fewest number of jobs in November in more than 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 is not alone. California, Missouri, Florida, and Iowa also saw increases. Tennessee had the largest decrease in initial claims, 2,972. Several other states experienced decreases as well. The unemployment statistics for December are due out January 08, 2010. Continued strong improvement will bolster confidence for the coming year.