Initial jobless claims fall more than expected

Given the damage to the job market caused by the recession, investors should view the weekly initial jobless claims data the way one views the long recovery process that follows a serious operation: There will be some good weeks and some not-so-pleasant weeks in the journey toward health. Last week was a good one, as jobless claims fell 21,000 to 530,000 for the week ending September 19, the U.S. Labor Department announced Thursday.

Economists surveyed by Bloomberg News had expected initial jobless claims to total 550,000 this week. Meanwhile, the 4-week moving average for initial jobless claims decreased 11,000 to 553,500, and continuing claims also fell by 123,000 to 6.14 million.
Economists view the 4-week average as a better indicator of unemployment conditions, as it smooths out anomalies caused by strikes, holidays, or other idiosyncratic events.

Economists also monitor the continuing claims statistic because it provides a snapshot of how long it's going to take the typical person to find comparable employment again after a job loss. In general, continuing claims above 3 million reflect a slack labor market, and point to extended job searches lasting six to nine months or longer.

The Economic Policy Institute, a liberal public policy think tank, is careful to point out that a decline in jobless claims does not equate to a net job gain: The economy is still shedding jobs monthly, and that situation has to reverse before one can say economic conditions are improving. One telling statistic concerning the state of the labor market: Five millions citizens have been jobless for more than six months. The pace of job layoffs is slowing, but unemployed workers are still not finding jobs, the EPI said.

The largest increases in initial claims for the week ending Sept. 12, the latest week for which data is available, were in: Wisconsin, +1,573; Oregon, +829; and Kansas, +677. The largest decreases were in Texas, -4,623; Illinois, -4,217; Pennsylvania, -3,961; Michigan, -3,012; and Massachusetts, -2,389.

Also, the highest insured unemployment rates in the week ending September 5, the latest week for which data is available, were in: Puerto Rico, 6.7 percent; Oregon, 5.6 percent; Nevada, 5.4 percent; Pennsylvania, 5.4 percent; Michigan, 5.2 percent; Wisconsin, 4.9 percent; California, 4.8 percent; Connecticut, 4.7 percent; North Carolina, 4.7 percent; and South Carolina, 4.7 percent.

Economic Analysis: The U.S. stock market Thursday will likely interpret the renewed decline in initial jobless claims and continuing claims bullishly. Those declines, combined with signs of stabilization in the the nation's manufacturing and housing sectors, provide additional evidence that the recession has bottomed and that a recovery, even if it's a mild one, is underway. Jobless claims have fallen about 15 percent since the peak reached earlier in 2009.

Still, as the Economic Policy Institute has pointed out, the healing process is only in its infancy and the nation has a large hole to fill: The recession has ballooned the U.S. unemployment rate to 9.7 percent, its highest level since the 1982-83 recession. As a result, the U.S. will need years of plus-200,000 monthly job gains to achieve full employment -- an indication of the task ahead for policy makers.
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