First-time unemployment claims fell below 400,000 last week, for the first time in over two years. CNN reports they’ve been stuck in the 400-500k range for the past year, after a peak of 651k in March 2009. The four-week moving average remains at 414,000 claims.
Initial claims don’t tell the whole unemployment story, of course. Hiring data, which should be available for December after next week, must also be considered. Reduced unemployment claims would suggest businesses reduced their firings and layoffs, but overall unemployment will only drop if they also start hiring people. We already have over 4.5 million people receiving unemployment benefits, plus an estimated 3.5 million who have exhausted their full 99 weeks of benefits.
CNN likes to put the best possible face on unemployment news these days, quoting Stuart Hoffman of PNC Financial Services as saying “the outlook for job growth is encouraging.” That’s the attitude CNN took last month, when it was cheerfully predicting 150,000 new jobs for November… but the actual total came in at a paltry 39,000. At the time, they were touting the wisdom of Bernard Baumohl of the Economic Outlook Group, who was even more full of… er, excuse me, “even more bullish” in predicting 235,000 jobs in November, based on “a general realization among businesses that the economic recovery is real, and that since so many of them have cut so sharply, there is now a rush to hire the most skilled workers at this point.” Apparently it only took them a couple of days to complete that rush.
The holidays always distort unemployment numbers, so conclusions about the current climate should wait until we’ve got a four-week average from January 2011, at the very least. Stability and opportunity lead to job formation. The tax deal gave us one, while back-door implementation of cap-and-trade through EPA regulations is killing the other. The incoming Republicans have a lot of work to do before a solid job growth environment is in place.
If we really are seeing the first weeks of a steady decline in firings and layoffs, it’s a good start. I’ve always had the sense that businesses are more eager to retain existing, trained employees than hire new ones, meaning it’s easier to slow down layoffs than encourage new job formation. It hurts to forego expansion and new hires, but it’s really agonizing to fire dependable people who know their jobs.
In any event, it’s going to take a lot more than sporadic bursts of modest job gain before we can wipe out the longest streak of 9-10% unemployment on record.