Jobless claims fall at a higher than expected rate
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The Labor Department reported that new claims for unemployment fell to their lowest levels since September, 2008. The claims adjusted by season fell by almost 22,000, to 432,000 which is 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 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 layoffs is more telling to analysts 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 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 on extended benefits went up by almost 200,000 in the second week of December compared with the week before. This was partly thanks 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 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 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.
