Chart by MB
In what could be the first bit of good news on the job front in two months, initial claims for unemployment benefits fell well below expectations last week, the Department of Labor
announced today. First-time claims fell to 414,000, a 16,000 drop from the previous week's revised figure of 430,000. The four-week running average, which smoothes out volatility and is therefore considered a more reliable indicator, remained at 424,750.
This is still well above the 400,000 number that many analysts consider a sign that net job creation is growing at a relatively healthy pace. The four-week average had fallen below 400,000 for eight weeks beginning in late February. But in the most recent eight weeks, it had clocked in higher, putting it back at the level it was in January. Weekly first-time claims for benefits have been above 400,000 for 10 straight weeks.
"This is not a derailing of the economy," said Bricklin Dwyer, an economist at BNP Paribas. "This is a period of weak growth, and we're going to see this for some time."
If the latest drop is an indicator that the trend is again downward, it might be mean that the paltry 54,000 gain in jobs reported for May will be a short-lived phenomenon. Or not. Numerous other signs are extremely discouraging on the jobs front. These include sharply reduced forecasts for growth in gross domestic product in the second quarter, lower retail sales, weaker manufacturing gains, plunging housing prices, extensive lay-offs of public-sector employees and a more pessimistic outlook by small-business owners.
If job growth were to remain at the current rate, it would take until the end of 2014 to return to the level of employment in December 2007 when the recession officially began. And that restoration would not absorb the number of Americans entering the work force as a result of population increase. Meaning that the unemployment rate would remain high.
Just as analysts remain divided over whether the slowdown in the economy is a temporary matter or will continue into at least 2012, they argue about whether various factors are combining to set long-term unemployment at a "new normal" level that is higher than has been the case historically. If a new normal is in the offing, its effect on the well-being of rank-and-file Americans is obvious, but the impact on politics far less certain.