December 3, 2009
HALFWAY HOME & A THOUSAND MILES BEHIND
Today’s update on jobless claims strengthens the case for arguing that the Great Recession is over.
New filings for unemployment benefits dipped 5,000 to a seasonally adjusted 457,000 for the week through November 28--the lowest since September 2008, the Department of Labor reports. The obvious caveat is that last week's number is skewed to the downside because of the Thanksgiving holiday, which undoubtedly delayed and otherwise deterred the newly unemployed from paying a call to the local unemployment office.
But while should be suspicious of last week's data point, there's no uncertainty about the broader trend. As our chart below shows, jobless claims have been in decline since peaking in March. That alone doesn't tell us that the economic contraction is fading, but it drops a rather large clue for thinking so when considered with a range of other economic indicators.
Anticipating the end of the recession based on looking at a general retreat in new jobless claims is a familiar notion on these digital pages. In the spring we argued that a peak in jobless claims would send a potent signal that the end of the recession was near. Calling peaks in real time is, of course, the stuff of guesswork. But now we can look back with confidence and say that new filings did indeed top out in late March of this year. That and a number of other encouraging macro signals, including the rally in the stock market, all but confirms that the recession has ended.
To the extent that corporate America is laying off fewer workers, the trend is good news, of course. Nonetheless, weekly losses in the upper-400,000 range are still too high. Consider that in the halcyon days before 2008, new claims were running in the low-300,000 range. By that standard, there's still a long way to go.
Even if claims fall further in the weeks and months ahead, as we expect they will, this is only half the battle in the all-important task of repairing the labor market, which has been blindsided by the events of late. In short, the second part of the recovery is one that requires job growth. Alas, on this front we should keep our expectations in check. What's more, the prospects for a quick recovery continue to look dim on ending the job destruction.
As we reported yesterday, ADP's estimate of the employment trend for November is firmly in the red to the tune of a 169,000 loss. That's a lesser retreat compared with October and well below the levels from earlier this year. But at this point—two years after the recession officially began—another slumping employment report feeds the fear that the American jobs machine is deeply wounded and can't get up.
Perhaps that's hasty. Given the magnitude of the recession, it's not beyond the pale to think that the labor market is destined to recover s-l-o-w-l-y. But the hints that job creation has been fading for some time precedes the Great Recession. For the past generation, every post-recession period has witnessed a lesser pace of job growth (in absolute and relative terms). The economic contraction over the past two years is sure to exacerbate that trend. Indeed, it already has. You have to go back to the 1930s to find a slower recovery in the job market.
In short, we're not expecting much in the way of a positive surprise in tomorrow's employment report from the Labor Department. The recovery glass is still only half full.
Posted by jp at December 3, 2009 9:39 AM
When every company has laid off every possible employee, then the initial claims will be zero. Does this mean everything is great?
I prefer to look at the continuing claims. This shows how workers are fairing in finding new jobs and this is not pretty.
and more telling is the productivity number which came in lower than expected. Job growth is still negative and as long as we are losing jobs the economy...well...sucks.
Posted by: Marc at December 3, 2009 3:45 PM