Thursday, July 19, 2012

Claims update

Weekly claims jumped last week, but only on a seasonally-adjusted basis. This confirms widespread suspicions that faulty seasonal adjustment factors (i.e., reality not conforming to assumptions, with the focus here being on the timing of scheduled auto industry layoffs) were behind the huge drop in claims the week before. What we are left with is a modest uptick in claims that is of the sort that happen now and then, and it probably has something to do with the fact that economic growth slowed in the second quarter.

Meanwhile, the number of people receiving unemployment insurance continues to decline: there were 15.8% fewer people on the dole last week than there were a year ago. This could well be the more important number to focus on, since it means that there are more and more people losing their unemployment benefits and thus gaining a new-found motivation to look for and accept employment—perhaps a less-than-ideal job, but a job nonetheless. Changes on the margin like this can be good for the economy down the road.


brodero said...

5 leading indicators this week...
not one has gone negative... said...

I just read your article to my wife, citing that the number of people 'on the dole' continues to decline...that there were 15.8% fewer receiving unemployment that one year ago.

She told me that was because they are all moving over to receiving disability checks.

Benjamin Cole said...

Good news, but still mild feeble growth--reflecting a Fed that is dithering, timid and directionless.

The inflation threat is now well behind the threat of a permanently weak economy, unfortunately one with a social net, meaning higher federal outlays (on top of the coprolite that makes up our federal agencies, military and civilian).

This model---not enough monetary stimulus but large federal deficits---has been tried, for most of 20 years, in Japan. It does not work, and is not working here.

QE was tried modestly in Japan from 2001 through 2006, and John Taylor gushed about the positive effects it had. Japan suffered no inflation as a result of QE---the sam result we have had. Where is the inflation?

Obviously, the empirical results of QE are vastly different from the economic orthodoxy and dogma that now define both parties and their adherents.

If a shrewd businessman was running this country, would he not seize an opportunity to pay down debt through monetization, when the alleged costs---inflation---never surface?

Scott Grannis said...

"Paying down debt through monetization" only works if there is inflation, and inflation brings real costs to many, since it is basically a transfer of wealth from the private sector to the public sector, and from lenders to creditors.

In any event, I don't believe there is such a thing as a costless monetization of debt.