Seasonally adjusted unemployment claims (top chart) last week fell to a new 4-wk. moving average low for the year. Actual claims (second chart) have been flat since late April. In a typical year, actual claims would have been rising at this time of the year, but that is not happening, so adjusted claims are falling. Either way you look at it, the labor market is doing better on the margin, and that is good, even though progress is slow.
Meanwhile, the total number of people receiving unemployment benefits—about 7,750,000—has not changed much in recent weeks, and remains quite elevated.
Not talked about is the improvement
ReplyDeletein California. The 52 week moving average of California's non seasonally adjusted jobless claims
set a new low for the year. This average has been mired between
75,000 and 74,200 for over a year
but lately it has started to fall.
Today it fell below 74,000.
Scott I really appreciate you positive views of the world, it's refreshing (not being sarcastic here).
ReplyDeleteHowever, the problem with unemployment numbers is that the discouraged workers fall of the unemployment rolls. It is important to look at labor participation, which is very low (by historical standards). the american economy requires about 125/150k new jobs each month just to keep up with population growth.
I will however, agree that things appear to be stabilizing. Which is the first step in a recovery.
In the way of a recovery are: (1) State and local government having to cut expenses, (2) Rising inventories, and (3) Rising energy costs. Since state and local government account for 13% of America GDP (see Cisco recent earnings conference call), the fact that they will have to cut expenses in the face of gridlock in DC (no more Federal gov't subsidies). Inventory are high on the assumption of rising final demand that has failed to materialize and finally, gas price are 6c short of $3 a gallon, which will eat up consumers' disposable income. Moreover, demand for oil is likely to exceed supply for the first time since 2007, caused by rising demand in Asia (+20% anticipated)
But then I'm an pesimist...
Frozen: all the problems you cite are real, but they don't necessarily equate to a headwind for the economy.
ReplyDeleteState and local spending is going to be cut back, no question. But this is good, not bad. When government spends money it spends it inefficiently. All the extra spending in recent years has been a drag on growth. If we reverse the spending ramp-up, that will be a boost to growth.
Inventories are rising, but they are still low. People cut way back on inventories in 2008 due to fear, now they are slowly recovering confidence and rebuilding inventories. That is good.
Higher gas prices will eventually choke off growth, but I think they have to go a lot higher before that happens. Money we spend on gasoline doesn't go down a black hole. It goes to producers all over the world, and they must spend the money on something. A lot of what we spend on oil gets recycled by OPEC back into the US economy. The bad thing about higher energy prices is when they become high enough to discourage investment or to discourage productive activities.
Frozen,
ReplyDeleteDid you catch the 60 Minutes piece last week on the tremendous gas reserves in the US that equate to 2Saudi Arabias? Although the segment did focus on enviornmental dangers of extraction, it did leave me with a sense of hope that we might someday be energy independent.
Scott:
ReplyDeleteYour comment is why I really appreciate your positive views. You absolutely balance my own gloomy view of the world
Bill:
ReplyDeleteYes, I did see the piece on Shale gas, the one issue is that that stuff is economical to produce when gas prices are around $8, not as they are today around $4.
I do like 60 minutes, but they do get carried away. I actually have buddies involved in the Shale Gas business. They are drilling now, with the anticipation that gas prices will eventually get to the profitable levels