No break in rising unemployment as continuing claims hit record 5.73 million

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Yet another record the U.S. labor market would rather not achieve: Continuing claims for unemployment benefits jumped 161,000 to a record 5.73 million, the U.S. Labor Department announced Thursday. More Americans are finding it hard to find jobs amidst the nation's worst recession since the 1980s.

Meanwhile, initial jobless claims increased 12,000 to 669,000 for the week ending March 28, the Labor Department said. That is the country's highest initial jobless claims total since the aforementioned Reagan administration-era recession in 1982. Initial jobless claims have now risen 72 percent from the same period a year ago.

Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 652,000. The four-week moving average increased 6,500 to 650,250.

Economists note that the high continuing claims level reflects labor market stress, and the long time it takes for those downsized to find comparable employment. Few companies are filling vacancies, many major corporations have announced large lay-offs, and even temporary work assignments are declining -- another negative sign for the labor market and the economy.

The record continuing claims total is a tell-tale stat: It reflects very soft labor market conditions. Keep in mind many economists believe the continuing claims statistic actually underestimates the number of long-term jobless citizens. If a laid-off person stops looking for work because he/she can't find suitable employment or any work, they're no longer counted as unemployed. Many economists say if this category was included, continuing claims would be 10 to 15 percent higher.

Take note: All these lay-offs -- and the specter of additional home mortgage defaults and consequent mortgage-backed securities defaults they imply -- are a major source of the toxic asset problem plaguing banks, financial institutions, and other market participants who provide credit.

Joseph Brusuelas, director at Moody's Economy.com, said the key to reversing the jobless/continuing claims trend is signs of a pick up in demand for goods and services.

"Companies are unsure of when demand will bounce back on a sustainable basis, so they're continuing to reduce the labor force," Brusuelas told Bloomberg News Thursday. "Personal consumption is in the process of stabilizing, and job losses will dampen that."

For investors, given the high level of continuing claims and the current pace of job losses, the best case scenario for the U.S. economy would be a recovery in revenue and earnings in late Q3 or early Q4 2009. If continuing claims continues to rise, it would probably push that revenue/earnings recovery into Q1 2010.

Economic Analysis: The U.S. economy now needs to create about 5.5 million jobs to return to full employment. Large job losses and the high level of continuing claims are serving as a foreclosure highway that leads directly to increased toxic assets. Without job creation, U.S. economic health is nearly impossible.

In normal times, back-to-back $1 trillion federal budget deficits would be enough to sour economists and market analysts almost universally. But the reverse is the case today, due to the pronounced recession. The large outlays are seen as one critical source of demand for an economy that needs all the stimulus it can get from the public sector, given the slump in business investment, international trade, and domestic consumer spending.

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