The previous week, originally reported at 292,000, was the lowest since April 2006. But even with the slight upward revision, that week may still be showing lower than it actually was because of problems with computer-system conversions that have caused processing backlogs in California and Nevada. Next week's report should clarify that situation. Nonetheless, applications are still far below where they were a year ago.
During the past 40 years, the best 12-month period for initial claims was August 1999-July 2000 when the weekly average was 285,000. For the 12-month period ending September 7, 2013, the weekly average has been 360,000.
Before the Great Recession, economists had considered first-time weekly claims of 400,000 a predictor of healthy job growth. That measure has been revised downward to 370,000 in the past couple of years.
But now with first-time claims averaging less than 360,000 for the past 12 months and less than 332,000 for the past three months, the growth in jobs has remained tepid. Unless the increase in new jobs starts moving up significantly faster, it has to be wondered just how valuable the first-time claims number really is these days as a predictor.
The four-week running average of claims, preferred by most analysts because it flattens volatility in the weekly numbers, fell to 314,750 for the September 14 week, down 7,000 from the prior week.
For both state and federal emergency unemployment compensation (EUC) programs, the total number of people claiming benefits for the week ending August 31 was 4,037,491, down 235,250 from the previous week. For the comparable week of 2012, there were 5,173,597 persons claiming benefits in all programs.
Total claims are down over last year for three reasons: People previously receiving them have found jobs; they have exhausted their benefits; or, they have left the labor force.
Exhausting benefits is happening sooner for jobless Americans now because Congress cut back the maximum duration an eligible worker can receive EUC compensation from 73 weeks to 41. A few states have cut back their allowable maximum duration from the half-century-old nationwide standard of 26 weeks to 20 weeks or less. Several states have also lowered the maximum weekly benefit workers can receive, and the federal budget sequester has reduced weekly EUC compensation checks by 11 percent or more, depending on the state.
Read more analysis below the fold.
Eric Morath and Jeffrey Sparshott at The Wall Street Journal report:
The downward trend in claims over the past several months shows that businesses are comfortable enough with the economy to retain their current employees. However, hiring has slowed from the pace seen earlier in the year. In August, employers added 169,000 jobs, below the average monthly gain for the year of about 180,000. The unemployment rate fell to 7.3%, largely because the labor force shrank.In fact, it's a good deal worse than that. For the past three months the average seasonal job growth has fallen to 148,000. If the economy were back to pre-recession levels, that would be considered fairly healthy. But, notes Heidi Shierholz at the Economic Policy Institute:
According to Congressional Budget Office estimates, if the labor market were healthy, the labor force would number about 159.3 million. But the actual labor force numbers just 155.5 million. That means there are about 3.8 million “missing workers”—jobless people who would be in the labor force if job opportunities were strong. If our 3.8 million “missing workers” were in the labor force looking for work, the unemployment rate would be 9.5 percent instead of 7.3 percent.If that 148,000 average monthly number of new jobs were maintained, because of the need to absorb population growth of working-age adults, it would take until May of 2028 to return to the unemployment levels when the recession began in December 2007.
The chart below shows the first-time applications for unemployment compensation since 2007 with an indicator for when the stimulus under the American Recovery and Reinvestment Act passed just four weeks into the Obama administration: