Continuing jobless claims surge to record 5.5 million
Continuing claims surged 185,000 to a record 5.47 million, the U.S. Labor Department announced Thursday, as more Americans found it hard to find comparable employment amid the nation's worst recession since 1981-82 Reagan recession.
Meanwhile, initial jobless claims fell 12,000 to 646,000 for the week ending March 14, the Labor Department said.
Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 654,000. The 4-week moving average increased 3,750 to 654,750.
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.
Fed concerned about job market
Those continuing claims -- and the specter of additional home mortgage defaults and consequent mortgage backed securities defaults they imply -- are a major reason the Fed expanded its quantitative easing policy Wednesday to include U.S. Treasuries and mortgage securities, many economists agree. The action will have the effect of increasing the money supply, and equally significant, increasing cash positions of institutions, who in turn can re-deploy that capital, easing credit conditions. Market analysts and traders generally approved of the move and Commodity Strategist David Moore was part of that sentiment.
"Markets have become more optimistic about the outlook for the U.S. economy in anticipation that this new policy will improve things," David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd, told Bloomberg News Thursday.
Economic Analysis: View the Fed's announcement of as 'more cavalry, in the nick of time.' The record 5.47 million continuing claims stat is a major drag on the economy: the U.S. economy must create job and reduce this stat in order for corporate revenue and earnings to increase at an adequate rate, and that means creating demand, which is the intent of the Fed's quantitative policy.
Also, keep in mind that many economists believe the continuing claims statistic actually under-represents 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 10-15 percent higher.
Bottom Line: The U.S. economy needs to create about 5 million jobs to return to full employment, so it's full-speed-ahead on all fronts (fiscal, monetary) regarding stimulus.