JOBLESS CLAIMS DIP, BUT REAL PROGRESS IS STILL MIA

Jobless claims fell slightly last week, dropping by 6,000. That’s good news. The trouble is that we’re still at an elevated 472,000 on a seasonally adjusted basis. One data point doesn’t say much, of course. What does the longer-term trend show? Lots of volatility recently, but nothing much has changed.


As our chart below reminds, weekly filings for unemployment benefits is about the same today as it was in December 2009. We’re going nowhere fast, a trendless trend that’s occasionally interrupted by a surge up, or down. But so far, after the dust cleared, there’s little if any progress in the labor market, at least by the standard of this series.

By some accounts, “the data can’t get much worse.” Maybe so, but there’s still a shortage of reasons for thinking it’s poised to get much better in the near term.
Is it all doom and gloom for the economy? Probably not. The Washington Post offers “five reasons to be optimistic about the economy.”
But quick fixes are in short supply. “It took more than a decade to dig today’s hole, and climbing out of it will take a while, too,” reminds Ken Rogoff of Harvard. “Why is it so tough to boost employment rapidly after a financial crisis?” One reason, he explains:

…is that the financial system takes time to heal – and thus for credit to begin flowing properly again. Pumping vast taxpayer funds into financial behemoths does not solve the deeper problem of deflating an overleveraged society. Americans borrowed and shopped until they were blue in the face, thinking that an ever-rising housing price market would wash away all financial sins. The rest of the world poured money into the US, making it seem as if life was one big free lunch.

The free lunch is over. “The bottom line is that Americans will have to be patient for many years as the financial sector regains its health and the economy climbs slowly out of its hole,” Rogoff warns.
The trendless trend in jobless claims certainly offers no reason to think otherwise.

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