Both initial jobless and continuing claims fall

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Modest progress this week on the employment front: Initial jobless claims fell 33,000 to 521,000 for the week ending Oct. 3, the U.S. Labor Department announced Thursday.

Economists surveyed by Bloomberg News had expected initial jobless claims to total to 540,000 this week. A year ago, initial jobless claims were 478,000. The four-week moving average for initial jobless claims decreased 9,000 to 539,750. Also, continuing claims fell 72,000 to 6.04 million.
Economists also monitor the continuing claims stat because it provides a snapshot of how long it's going to take the typical laid-off person to find comparable employment. In general, continuing claims above 3 million reflect a slack labor market and point to extended -- six to nine months, or longer -- job searches.

The Economic Policy Institute, a liberal think tank based in Washington, D.C., recently summarized the nation's daunting job creation task. The EPI estimates that 8 million jobs have been lost since the recession started in December 2007. Just to keep up with population growth, the U.S. economy needs to add 127,000 jobs each month, which translates to 2.7 million jobs over the 21-month recession.

Hence, the labor market is currently 10.7 million jobs below what's needed to return to the pre-recession unemployment rate, the EPI said. To fill that gap by September 2011, the nation would have to add an average of 573,000 jobs per month for two straight years.

The largest increases in initial claims for the week ending Sept. 19, the latest week for which data is available, were in California, 4,467; Ohio, 3,421; Illinois, 1,815; Missouri, 1,049; and Tennessee, 1,048. The largest decreases were in New York, 2,253; North Carolina, 1,609; South Carolina, 1,159; Arkansas, 818; and Florida, 734.

Also, the highest insured unemployment rates for the week ending Sept. 26, the latest week for which data are available, were in Puerto Rico, 6.1 percent; Oregon, 5.3 percent; Nevada, 5.2 percent; Pennsylvania, 5.0 percent; California, 4.9 percent; Michigan, 4.8 percent; Wisconsin, 4.7 percent; Arkansas, 4.6 percent; North Carolina, 4.6 percent; and South Carolina, 4.5 percent.

Economic Analysis: The U.S stock market Thursday will likely interpret the renewed decline in initial jobless claims and continuing claims bullishly. Those drops, combined with signs of stabilization in the nation's manufacturing and housing sectors, provide additional evidence that the U.S. recession has bottomed and that a recovery, even if mild, is underway.

However, for the typical person, at least initially the recovery will feel like a recession, largely due to the high level of unemployment and the dearth of jobs. Moreover, given likely mild GDP growth during the recovery's initial stage, jobless claims most likely will not return to normal levels near 200,000-225,000 for at least a year, probably longer.

One caveat: Given the U.S. economy's flexibility/ability to adapt, there's always a chance that an unexpected catalyst will suddenly get the job-creation ball rolling. That would let the job market quickly build momentum, with greater than 200,000-a-month gains. That would be a pleasant surprise, indeed.
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