Thursday, April 25, 2013

Claims continue to decline

Weekly claims for unemployment continue to show no sign of any unusual weakness in the labor market, as they continue their multi-year decline. Meanwhile, the number of people receiving unemployment insurance has fallen by 1.2 million, or 19% in the past year. These are significant facts that all but rule out a recession. 

This chart shows unadjusted claims since the beginning of 2011 and their 52-week moving average, which remains on a slowly declining trend.

The number of persons receiving unemployment insurance has fallen by more than 5 million in the past three years. It was boosted far beyond what was typical in prior recessions by Congress' decision in mid-2008 to grant "emergency claims" benefits which greatly extended the time that an individual could collect benefits. Emergency claims have now fallen from a high of almost 6 million to 1.8 million today, and the number is still declining. Politicians think of emergency claims as a way to help those who lost a job, but economists think of them as headwinds to recovery, since they reduce individuals' incentives to return to work and thus act like a headwind to growth. Emergency claims have good intentions, but in the end probably do more harm than good; so it is good that they have declined by almost two-thirds from their early 2010 high.

On the margin, the perverse influence of policymakers on the economy is diminishing, and that allows the natural forces of recovery more breathing room. I've learned to never underestimate the U.S. economy's ability to overcome adversity, and there is more reason every day to continue to follow that advice. The economy is very likely to continue to grow, and that's all that matters for investors in today's zero-interest-rate-cash environment.


Benjamin Cole said...

Yes, claims are down, but man, the number of people with a job is dead in the water.

We are not generating jobs in the USA.

This will create horrible problems down the road. People will quit the labor force, and look for the state to take care of them.

Why the Fed is being so timid, and feeble in their approach to the economy is still a puzzle.

The FOMC does not have members on it from the construction, real estate or manufacturing industries. It is a bunch of bankers.

Unemployment to them, or a stagnant labor force, are just numbers.

Perhaps the membership of the FOMC should be broadened to include people from the real world.

mmanagedaccounts said...

This is Bill Gross' new normal. This is what it is to be like Europe ---- slow growth and high unemployment.

Whoever gets the Democratic nomination for the presidency in 2016 will probably tell us the Dems have given us 16 consecutive years of economic growth, 4 under Clinton and 4 under Obama.

Look at what we got with Bush, a warmongering presidency with recession bookends.

And the media has declared Krugman economics rock solid right and Grannis economics a failure.

We are in trouble, boys: slow to no growth, high unemployment and bigger government for as far as the eye can see.

William said...


I don't understand why you keep harping on the Federal Reserve when they have taken extraordinary measures never before contemplated - much less used - to foster low interest rates.

Why don't you place the blame where is squarely belongs on the US Congress and its misconceived fiscal and tax policies.

You're beating a dead horse - not to mention that your posts are incredibly repetitious and boring. said...

Partly demographics, partly bad economy is the takeway from this article, WSJ, April 29, 2013, as to the cause of higher unemployment numbers in the current expansion.

Real Culprit Behind Smaller Workforce: Age

FWIW, and yes I'm not a robot.