On Wednesday morning, the U.S. Department of Labor released the latest report on claims for unemployment insurance. The week to December 20th saw 586,000 new claims for unemployment insurance on a seasonally-adjusted basis, which is a 26-year high. The actual number was even higher at 715,496. While these are extremely high numbers, we have to wait until the holiday season is over before drawing any definitive conclusion because this time of year is notorious for distortions from the effects of seasonality.
In looking at the two graphs of initial jobless claims and contnuing claims below, one can easily see that this is already the worst recession in the United States since 1982. However, I want you to focus on the slope of the lines. The lines increase much more sharply than they did in 1980 or 1982, making this recession easily the largest economic shock since the recession of 1973-1975. The rise in continuing claims is particularly fast – the slope of the line is nearly vertical from about December 2007.
I read this to suggest that consumers will increase income-based savings at the expense of consumption, debt and asset-based savings in order to deal with the economic shock. From all accounts, Christmas was a bust for retailers, demonstrating that this trend has already begun. However, I do expect the trend toward building a job loss safety nt through income-based savings to increase markedly in the coming months.
Source
Unemployment Insurance Weekly Claims Report – Department of Labor