Jobless Claims Point to More Economic Weakness
Posted by Michael A. Kamperman on August 20, 2009
Many economists are predicting positive growth for the U.S. economy in the third quarter of this year. Others are saying the recession has already ended and the economy is now recovering. The weekly jobless claims report is indicating those believing the economy is in a state of recovery are clinging to faith, not facts. The latest weekly jobless claims number rose to 576,000 and the 4 week moving average is back up to 570,000. This means the economy is still shedding jobs. Some economic commentators are claiming that as soon as the weekly jobless claims fall below 500,000 the economy will start creating jobs. We are so used to seeing horrible numbers that we now think really bad numbers are good. Weekly jobless claims in the high 400,000 range will still mean the economy is losing jobs, just less slowly than it is now. For perspective, consider that the peak in weekly jobless claims in the recession in the early 1990’s topped out at 509,000 in March of 1991, the only week reported at over 500,000. Yet the unemployment rate rose from 5.2% in May of 1990 to 7.8% in June of 1992. Unemployment rose 2.6% over a 2 ½ year period at a time when weekly jobless claims were averaging over 130,000 less than they have in the month of August. In the recession of the early 2000’s, weekly jobless claims reached a peak of 517,000 in September of 2001, and averaged over 140,000 less than the month of August. Again, the unemployment rate rose by over 2.4% in a 2/12 year period from 3.9% to 6.3%.
The jobs picture in the month of August is much worse than it was during any month in the previous two recessions. All we are witnessing is a slower rate of decline, not growth. The positive GDP reports out of France, Germany, and Japan for the second quarter of 2009 were based on declining imports boosting the “net exports” calculation. If other large economies are buying less rather than more how can growth resume around the globe? The answer is it cannot. As long as credit is tight the job losses will continue.
What we need is a strong focus from Washington on a program that will create jobs. It doesn’t make sense to debate whether tax cuts or stimulus spending is the best method. What we need to debate is the current stimulus plan is not working. It is not creating jobs; it is not saving nearly enough jobs. It is better to be weaving down the road in the right direction than to be heading in the wrong direction. Right now Washington is asleep at the wheel and needs to wake-up. While it is true that economic growth precedes job growth, it is not true that economic growth occurs when job losses are still mounting. History says weekly jobless claims that are averaging 570,000 are a strong indicator we are still losing a substantial amount of jobs.
