Unemployment claims stuck at 570,000
The Department of Labor reported that jobless claims in the latest week decreased 4,000 from a revised 574,000 in the previous week. The figure was higher than analysts anticipated. Initially, the last week was reported as 570,000.
The 4-week average is now 571,250, marking the eighth consecutive week that initial claims for unemployment insurance have come in below 600,000. Initial claims are well below the peak levels from April, the decline being well within the norm for recessions over the past four decades.
However, this recession is not marked by an unprecedented surge in job loss. Job losses are not the problem. It is the lack of hiring, which has made the downturn so punishing for the jobs market. Gross job losses are less important than net job losses – and net losses is where we are struggling.
The ADP report yesterday indicates we were down another 298,000 private sector jobs in August – this after 17 straight months of job losses. Expect a similar number when the Employment Situation numbers are released tomorrow morning.
But, the lacklustre employment market dates back to the previous recession and jobless recovery. Non-farm payrolls are now lower than they were when President Bush entered office over 8 years ago in January 2001. This record is much worse than any period since the Great Depression. (Below I have constructed a chart using all available data to show the 100-month change in non-farm payrolls since January 1939 when record-keeping began).
Conclusion: The employment market is weak and – absent asset price inflation – it will be a drag on the ability for consumers to spend for some time to come. Tim Geithner is correct that ending stimulus now would throw the economy back into recession. Depending on your economic philosophy this is either a necessary end to artificial economic support or a vital lifeline preventing untold economic harm.