Jobless Claims Report Shows Positive Move Toward Natural State of Employment

Now well-embedded above the psycho- logically dampening threshold of 400K, the latest weekly jobless claims tally held at about the same level seen over the past several weeks. Still, while the report is surely full of lowlights, it does include one bright spot that illustrates a labor market condition not yet anywhere near natural state.

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Jobless Claims Report Shows Positive Move Toward Natural State of Employment

Weekly Initial Jobless Claims for the period ending June 4 increased by another 1,000 above last week’s revised rate, to 427K. Thus, over the last three weeks, we’ve recorded 429K, 426K and now 427K new benefits filers. Remember, we have been unscientifically tracking the enthusiasm of the stock market in relation to the claims filings and there is an unscientifically obvious correlation – you run the regression. As jobless claims broke under 450K and then 400K for the first time, stocks rejoiced the coming of the new old economy, or recovery in drab-man’s terms. Just as quickly as stocks rejoiced over dwindling claims counts, they lost hope with their revival. Of course, other economic indicators have offered a similarly sad signal, though at varying rates and times.

The four-week moving average of jobless claims offers some mildly good news today, perhaps like a cancer patient hearing that no new tumors had appeared. The four-week claims count decreased 2,750, to 424K. Considering that this figure sat as high as 439,750 in the May 21 period might give our hypothetical cancer patient some hope. We are not cured but perhaps feeling a bit better today, with the Dow Jones Industrial Average seeking a half-point gain in early trading.

If you dig deep enough, there is still good news to be found in labor data, believe it or not. The insured unemployment rate dropped to 2.9% on a seasonally adjusted basis through May 28 (the latest for this data point); that’s down from 3.0% reported the week before. Better yet, the number of people receiving benefits of some sort for their unemployment keeps improving. This week’s data covering the May 21 period showed the total number of unemployed persons receiving some sort of benefit, including unemployment insurance extensions, improved by 89,233 to 7.6 million. This figure has been steadily improving, a sign that we are not yet near a natural state of national employment. Some claim, and we agree, that many of the lost jobs of the last decade will never return. However, new jobs should be created nonetheless as population growth, wealth stores and ambitious Americans push growth.

Speaking of the unemployment insurance extensions, the number of Americans receiving such benefits fell slightly in the May 21 period, losing 6,593 people, leaving 618,459 long-term insured unemployed Americans. We again remind you that there is a definite threshold that many Americans fall short of, leaving them high and dry as far as these benefits are concerned, while they are just as unemployed as the rest. These are the folks who are being foreclosed upon, the forgotten.

In conclusion, as we have highlighted, there is a reversion to the mean occurring in the labor market, to a natural state of national employment that is clearly better than what we have today.

Regional Lowlights:

The highest insured unemployment rates in the week ending May 21 were in Alaska (5.0 percent), Puerto Rico (4.4), Oregon (4.0), California (3.9), Pennsylvania (3.9), Nevada (3.6), Connecticut (3.5), New Jersey (3.5), Illinois (3.3), and Rhode Island (3.3).

The largest increases in initial claims for the week ending May 28 were in New York (+3,187), Oregon (+1,508), Missouri (+1,158), Illinois (+1,081), Washington (+844), while the largest decreases were in California (-1,614), Wisconsin (-1,032), Massachusetts (-929), New Jersey(-882) and Texas (-659).



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