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Posted by: Joe Weber on July 30
Harry S Truman famously cried out for a one-handed economist, complaining that his financial soothsayers would constantly say “on the one hand … but on the other.” With her July 30 analysis of the latest jobs reports, Northern Trust economist Asha G. Bangalore is continuing the tradition. It’s enough to make even a diehard Republican side with Truman.
Unemployment tallies continue to grow, but Bangalore reports that an important category among those out of work is declining. Her conclusion: “the pace of layoffs is diminishing.” So, on the one hand, things look worse. On the other, they could be worse still, and hidden in the overall numbers are signposts of improvements.
Equivocation? Well, maybe. But it’s sadly true that unemployment tallies grow well past the time a recovery has begun. Employers don’t want to hire until they are sure that growing demand for their products or services will justify the expense and some continue to cut to deal with reduced demand. What’s more, graduates and other new entrants come into the workforce constantly, so the pool of potential hires grows every day.
So the initial jobless claims for the week ended July 25 rose 25,000 to 584,000. Part of this rise, Bangalore notes, is misleading because the claims in July were reduced because of seasonal layoffs by the automakers in May and June, earlier than expected. Still, the tally is sadly higher.
On the other hand, she notes, the peak in initial jobless claims took place in March. Back then, 674,000 jobs disappeared. The tally has climbed for the past two weeks, but still isn’t as bad as it was then.
More important, Bangalore notes that it is significant that the tally of continuing claims for unemployment is dropping. Such claims actually peaked in late June and have mostly been sliding since. Continuing claims fell 54,000 to 6.197 million for the week, marking a decline for four out of the past five weeks in that sad tally. If you add in a tally under the extended benefits program, you get a total of 9.26 million, down from the peak of 9.72 million for the week ended June 27.
Bangalore points to a decelerating trend in the year-to-year change of seasonally unadjusted initial claims. She notes that the number of recipients under the special extended benefits program fell in the week ended July 11. Concludes Banglore, “these facts suggest that the pace of layoffs is diminishing.”
Indeed, Fed Chairman Ben Bernanke agrees. In his recent town meeting on public TV, the Fed head said the jobless claims report is one of the leading economic indicators he uses to track the course of the economy. Still, even with the good news – relatively speaking -- one can’t get too far out on a limb here. Bangalore expects a “jobless” recovery in the economy for several quarters.
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