Thursday, July 8, 2010
The number of new weekly claims for unemployment insurance has been flat to slightly down so far this year, and that suggests that conditions in the labor market are not deteriorating and are probably improving a bit on the margin. We see the same story in the number of new jobs created this year: modest improvement.
One of the biggest changes affecting the labor market has gone largely unreported, however: emergency claims for extended unemployment insurance have dropped by 30% (about 1.75 million) since March. When we add those who continue to receive claims, we find that the number of people receiving some form of unemployment compensation insurance has dropped by 3 million since January (bottom chart). Undoubtedly many of those are feeling pretty badly right now, but some (almost a million) have new jobs, and some are going to be more inclined to find and accept a job, even if it means the pay doesn't match their expectations. (I've seen numerous reports of businesses that are having trouble finding willing workers, since the pay they offer doesn't beat the combination of leisure and unemployment insurance that unemployed workers are receiving.)
I would add that never before in history has the government been so generous in its provision of unemployment insurance, thanks to the size and extent of the emergency program. Whether that has been a factor retarding the recovery, or whether on balance it has helped, we really don't know. But if you're looking for "what's different" about this recovery, here is a big one.
Posted by Scott Grannis at 8:39 AM