Initial jobless and continuing claims fall

It isn't much, but amid talk of a five-year recession (or worse), investors, executives and economists alike will take it.

Both initial jobless claims and continuing claims fell in May: initial jobless claims fell 4,000 to 621,000 and continuing claims dipped 15,000 to 6.735 million, the U.S. Labor Department announced Thursday.

One other, minor bright spot: it was the first time in about four months that the continuing claims statistic did not rise.

Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 621,000. However, the 4-week moving average rose 4,000 to 627,250.

John Challenger, CEO of placement firm Challenger, Gray & Christmas, said although job layoffs are likely to moderate this summer, there's no guarantee they won't trend back up this fall, if aggregate demand in the U.S. economy does not rise.

"Corporate downsizing may continue to remain slow during the summer months," Challenger said, Bloomberg News reported. "We could see the pace accelerate again in the latter half of the third quarter," he said, citing restructuring by auto companies.

Job deficit is huge

Further, to gauge the depth of the current economic downturn from a job loss standpoint, the U.S. economy would have to add about 200,000 jobs per month – a roughly net 100,000 job gain over the monthly gain needed to keep unemployment from rising – for the next five years to replace the 5.7 million jobs lost during the recession.

Economists say fewer lay-offs mean that consumer spending declines will likely abate – provided Americans resume a normal consumption pattern. Right now, the 'frugal consumer' dominates: the U.S. savings rate is at a 14-year high of 5.7 percent.

However, investors should not expect a quick reduction in the unemployment rate as U.S. economic growth resumes. That's because unemployment is a lag indicator: it will likely continue to rise for several months -- perhaps as long as a half-year -- even after the U.S. economy starts to recover, as companies first use existing capacity to ramp-up production, then later add employees as demand strengthens.

Economic Analysis: Again, not much to write (or e-mail) home about regarding jobless claims and continuing claims, but we'll take it. The key concerns whether jobless claims can continue to fall. If jobless claims have peaked and repeatedly fall week after week, that would be the best news for the U.S economy since the recession started. If they haven't, U.S. policy makers have to consider adding more stimulus, including another fiscal stimulus package.
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