How weak is the U.S. employment market?

Initial jobless claims came in above 600,000 for the 12th straight week at 640,000.  Continuing claims came in at a record 6.1 million, up 3 million from this time last year.  Both of these numbers suggest a very weak market and you can bet you bottom dollar this will be reflected in the unemployment report due out early next month.


Calculated Risk has a boiler-plate finish to its jobless claims report every week: “This is another very weak report and shows continued weakness for employment.” But, how weak is the jobs picture really?

Average Initial Claims are trending down, both for seasonally adjusted numbers and for unadjusted numbers. Comparisons to last year continue to trend down as well, with the worst comparison for unadjusted numbers having been a full three months ago. To me, this suggests that the worst of the carnage in the jobs market for this cycle is behind us.  Mind you, the numbers do show continued weakness for unemployment that I see lasting well into 2010, but I am not convinced that the ravages of unemployment will continue to work against consumer spending.

Paul Kasriel and Asha Bangalore of Northern Trust say:

It is likely that real consumer spending grew in the first quarter of this year after having contracted in the third and fourth quarters of last year. At least, this is what the behavior of “real” retail sales is suggesting. When nominal retail sales data are deflated by the CPI for goods, the quarterly average of this proxy for real retail sales grew at an annual rate of 2.5% in the first quarter of this year after having contracted in each of the five preceding quarters (see Chart 4). Although both nominal and “real” retail sales fell in March, there has been a rebound in same-store nominal chain-store sales in the three weeks ended April 11 (see Chart 5). The weak showing for retail sales in March and the apparent rebound in late-March – early-April might be related to the relatively late Easter holiday this year.

Mind you, they are NOT saying we are about to see an imminent recovery. However, they do believe that the worst is behind us (for this cycle) and hat GDP may turn positive as early as Q4 2008.

there is a good chance that the worst for the U.S. economy in terms of quarterly contractions in real GDP is behind us, occurring in the fourth quarter of 2008.

My point? The data is weak, but it was a lot worse in January. Yes, unemployment is rising and will continue to rise through 2009 and well into next year. However, unemployment is a lagging indicator. If you are making investment decisions, planning your business and hiring plans or just want to know what is happening, looking at the unemployment number is going to give you a very distorted picture.

Unemployment Insurance Weekly Claims Report – U.S. Department of Labor
Are We There Yet? (PDF) – Paul Kasriel and Asha Bangalore, Northern Trust

  1. John says

    Well… OF COURSE it was a lot worse in January. All those holiday short term jobs were shutting down. Sorry, there is no way to paint a happy picture of current unemployment figures, which are well watered down by the government in any case. Real unemployment is closer to the U-6 figures, now approaching 17% just 6 months after our “Crash of ’08.” It did not reach this level during the ‘Great Depression’ for a full 18 months, (June of 1931). So we are well ahead of Depression era job loss rates, and to think that this will not affect consumer spending is silly. It will.

  2. Edward Harrison says


    You are missing the point. The increase in unemployment already has affected consumer spending. But that affect is starting to become less pronounced. As Kasriel notes, consumer spending is now surprising to the upside.

Comments are closed.

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