Today’s update on new jobless claims for last week shows a gain in the number of freshly minted unemployed, but that doesn’t mean the general decline is over.
New filings for unemployment benefits jumped last week by 17,000 to 474,000, the Labor Department reports. But as you can see from the chart below, the overall trend has is down, albeit interrupted at times by temporary setbacks. Last week dispensed another one of those setbacks.
But barring some dramatic new and unexpected event with hefty negative consequences, weekly jobless claims are likely to drift lower in the months ahead. The economy is recovering, albeit slowly and in fits and starts, but the recovery rolls on. It remains to be seen just how durable this expansion will be, but for the moment the growth, light and tenuous as it is, has legs.
Indeed, the positive momentum continues to show up in continuing claims for unemployment too. This metric, which tallies those who’ve been collecting jobless benefits for some time, dipped to 5.157 million for the week of November 28, the latest data available. That’s more than 300,000 fewer than the week before and the lowest since February.
In fact, the biggest risk is less about positive momentum in the recovery du jour. That’s going to continue into 2010. We can’t simply assume that all’s well, of course, but the mending process isn’t going to suddenly evaporate. What we should be worrying about is what comes after the current burst of rebound runs its course. Will the natural order of economic growth that’s prevailed over the decades reassert itself? Or are we headed for something new and not necessarily productive in the business cycle? The jury’s still out on such questions although midway or so in 2010 we’ll have a better handle on an answer.
Meanwhile, we have a government committed to throwing everything but the kitchen sink at the forces of contraction. And politicians and policy makers aren’t shy about saying so. Perhaps the most striking example came in President Obama’s comment this week. As he said at the Brookings Institute on Tuesday, the nation will “spend our way out of this recession.” Given the ambitious embrace of liquidity injections on the monetary and fiscal side of the table, no one should doubt the President’s intentions. Evaluating the results is something else.
There are good and bad consequences to such a strategy. We’re seeing some of the good side, i.e., the Great Recession is over and Great Depression II has been averted. Much of this, of course, can be attributed to extraordinary stimulus via the Federal Reserve. The natural buoyancy of the U.S. economy deserves credit as well, perhaps most of the credit. Unfortunately, teasing out what was critical in reviving the economy (or preventing deeper problems, if you prefer) and what was superfluous is destined to remain a guessing game. So it goes in macroeconomics.
Having sampled some of the positive results of government spending in recent months, the future may bring some of the negative consequences. There are no free lunches in macroeconomics, but there are risks. Determining if recent policy decisions were wise or not has yet to be determined, but judgment day is coming. Meantime, the recovery is still running, albeit with more than a few caveats.