Initial jobless claims for unemployment benefits fell by 20,000 this week to 512,000. The previous week's jobless claims numbers were revised as slightly higher, so arguably the drop was 18,000, but that's still a nice upturn for jobless claims.
The four-week moving average of jobless claims dropped by 3,000 to 523,750. Since new jobless claims can be changeable from week to week, the four-week moving average is generally considered a improved gauge of where we are. The graph below (from http://www.calculatedriskblog.com/) shows the history of that average. We are now 135,000 below the peak set back in April. This is a key piece of evidence that the recession is over.
However, we stay above the highest levels seen in either of the last two recessions. The level indicates that we are still losing jobs, but at a slower rate than we had been. In the past we did not start to perceive actual increases in the number of jobs in the economy until after the average fell well below 400,000, so works still needs to be done. The good news, though, is that the decrease in jobless claims has been pretty steady, and we have not started to plateau the way we did after the last few two recessions.
On the continuing jobless claims front, the data was assorted. While regular continuing jobless claims fell to 5.479 million, a drop of 68,000, those only count regular state benefits which generally run out after 26 weeks. One of the key signatures of this downturn has been the incredible duration of unemployment for those who lose their jobs.
The average person (mean) who is reported jobless claims has been so for more than 26 weeks, and the middle by more than 17 weeks. We will see tomorrow if those duration jobless claims figures changed in October.
When people run out of regular state benefits, they move to emergency extended unemployment benefits, mostly paid for by federal money related to the American Reinvestment and Recovery Act, of ARRA, otherwise recognized as the stimulus package. Extended jobless claims rose by 115,000 to 4.01 million. Thus 9.759 million people are now getting unemployment checks, an increase of 47,000 from last week.
After weeks and weeks of dithering, the Senate finally passed an extension of those emergency benefits for jobless claims last night. This will prevent over 1.4 million people from losing their last financial lifeline before the end of the year.
Most economists see eye to eye that unemployment benefits are among the most effective ways to spend stimulus dollars, since the money goes directly to people in need, and those people are highly likely to spend the money swiftly, thus providing a multiplier effect. The problem, though, is that you don’t want unemployment insurance to become a unending welfare program. The idea has to be that it is a short-lived bridge during tough times, not a way of life.
Still, new job creation at historically low rates -- leaving a lot of people with out any income at all -- not only would cause huge humanitarian problems, it also causes big economic problems. While most of the unemployed are likely to be far more frugal this year in their Christmas shopping, doing more buying at Big Lots (BIG - Snapshot Report) and Wal-Mart (WMT - Snapshot Report) as opposed to Saks (SKS - Analyst Report) or Nordstrom’s (JWN - Snapshot Report), without the extended benefits they would not be spending at all, not even for basics -- let alone Christmas gifts.
