Weekly Jobless Claims Show no Recovery in Sight
Posted by Michael A. Kamperman on June 25, 2009
The most real time U.S. government economic indicator is the weekly jobless claims reported by the Department of Labor. The latest report showed jobless claims were still over 600,000 for the 21st straight week. Jobless claims first passed 500,000 per week in November of 2008, and have now stayed there for 33 weeks. With weekly jobless claims staying over 600,000 for most of the June reporting period, it is reasonable to assume the unemployment for June will rise to somewhere between 9.5% to 10%. To bring the current weekly jobless claims stat into perspective, weekly jobless claims never reached 500,000 in either the 1991 nor 2001 recessions. In the more severe recession of 1974-1975, jobless claims did pass 500,000 per week and stayed there back and forth for 29 weeks. In the double dip recession of 1980/1982, jobless claims did pass 600,000 per week. In the 1980 recession jobless claims stayed above 500,000 for 22 weeks and passed 600,000 for a few of those weeks. In the more severe 1982 downturn, jobless claims were over 600,000 for 12 weeks and stayed back and forth over 500,000 per week for 67 weeks. The workforce is quite a bit larger today than it was in the 1970’s and early 1980’s. However, the economy has become more reliant on services and on people who are self-employed. If you are self employed you usually do not qualify for unemployment compensation even if work has dried up. It is therefore difficult to draw an apples to apples comparison between the 1970’s and early 1980’s versus today. We do know that the unemployment rate reached a high of 10.8% at the height of the second leg down of the 1980/1982 recession. The overall unemployment rate is the best apples to apples comparison we have to compare today’s overall unemployment pain with the past.
The weekly unemployment claims are screaming that the recession is not over. It doesn’t mean the recession won’t end next week, it simply means it is not over yet. The depression could go on and on, or it could all turn on a dime next week. Unfortunately, the thing necessary to turn the economy around is a restoration of the credit markets. Washington is now moving backwards rather than forwards in repairing the broken credit markets. Today, the Fed announced that they are scaling back on some of their ill-conceived programs designed to support the credit markets due to a lack of demand from most of the Zombie banks. Rather than offering new more effective programs to restore lending the Fed is content for now to let the markets sort the economy out. The Administration and the Fed should ask their predecessors of the 1930’s how well that strategy worked.
The message needs to reach President Obama that we are in a debt-induced asset-bubble-popping deflationary depression akin to the one in the 1930’s. I believe that if he was surrounded by advisors informing him of this he would be willing to take dramatic action to right the ship. Unfortunately, President Obama has surrounded himself with wonkish academic economists that rely on extrapolating past charts to predict the future. Right now these economists are looking at the worst post World War II economic downturns and saying the turn should come soon, just be patient. The credit markets were not broken in the 1970’s and 1980’s. However, they are broken today just like they were in the 1930’s. How much common sense does it take to realize our consumer based economy cannot recover if mom and pop cannot buy a home or a car?
