Unemployment soars to record 6.02 million
The song remains the same in the nation's labor market. Continuing claims surged 172,000 to a record 6.02 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.
Meanwhile, initial jobless claims decreased 53,000 to 610,000 for the week ending April 11, the Labor Department said. Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 658,000. The four-week moving average decreased 8,500 to 659,500.
Job market remains stressed
Although the weekly stat declined, economists tend to emphasize the four-week moving average over the weekly claims stat, as it weeds out one-time anomalies, such as holidays and strikes that can distort the one-week total.
Economists also note that the high continuing claims level reflects considerable 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 scarce, another negative sign for the labor market.
Further, 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 can't find suitable employment or any work, he's no longer counted as unemployed. Many economists say if this category was included, continuing claims would be 10-15 percent higher.
"Companies are maintaining a defensive stance, filling only critical vacancies, with little need to expand payrolls. The demand just isn't there," economist Richard Felson told DailyFinance Thursday. "There are some signs the recession may be bottoming, but not nearly enough to prompt big or small companies to start hiring en masse."
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, but Felson cautioned "that is an optimistic scenario." A rising continuing claims level would push that revenue and earnings recovery into Q1 2010.
Economic Analysis: The U.S. economy now needs to create about 5.75 million jobs to return to full employment. Without job creation, U.S. economic health is nearly impossible. Further, while in normal times back-to-back trillion dollar federal budget deficits would be enough to sour economists and market analysts almost universally, the reverse is the case today, due to the U.S.'s pronounced recession. The large outlays are seen as one critical source of demand for an economy that needs all the demand pressure it can get from the public sector, given the slump in business investment, housing construction, international trade, and consumer spending.
Further, economists such as Felson are now starting to talk about changes to the U.S. economy that will lead to higher "long-term unemployment," also known as structural unemployment. That points to a need to expand worker re-training and education programs, to enable these displaced employees to learn new skills so that they can rejoin the workforce, Felson said.