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Chart from Calculated Risk shows first-time claims since 1971. Click for a larger version.
As expected, the surge in first-time unemployment benefit claims in the wake of Hurricane Sandy tapered off for the second week in a row, the Department of Labor announced Thursday. Seasonally adjusted first-time claims fell to 393,000 for the week ending Nov. 24, down from the revised 416,000 claims for the previous week. That compares with 399,000 for the comparable week of 2011.

The four-week running average that smooths volatility in the weekly figure rose to 405,250.

Immediately after the hurricane slammed the Eastern seaboard, first-time claims dropped, no doubt in great part because people's mobility was curtailed and electricity outages made filing difficult. Subsequently, however, the numbers soared. In the week ending Nov. 10, they reached their peak of 451,000, the highest first-time claims had been in two years, except for a one-week surge in April 2011. As predicted, initial claims have fallen sharply since then.

In the hardest hit state, New York, applications fell by 30,603 after having increased by nearly 44,000 the previous week. In Pennsylvania and they dropped by 11,451 after more than a 7,400 increase the previous week.

Given that trajectory, it's likely first-time claims will, next week or the week after, fall back into what has been their range for most of 2012: 360,000 to 380,000.

Meanwhile, the Congressional Budget Office showed the importance of the federal government's "emergency" unemployment benefits in a report released today, Unemployment Insurance in the Wake of the Recent Recession. Those emergency benefits, passed to extend the duration of payments to out-of-work Americans as much as 73 weeks beyond the 26 weeks all states used to provide, are set to expire on Dec. 29, as I've noted several times, most recently here. If renewed for a year, the CBO says, the impact would be to create or save 300,000 jobs and that gross domestic product would be 0.2 percent higher in the last quarter of 2013 than it would otherwise be.

And, in the last bit of major economic news reported so far Thursday, the Bureau of Economic Analysis reported in its second estimate of that real growth in the gross domestic product on an annual basis was substantially higher for the third quarter than reported last month in its first, so-called "advance" assessment: 2.7 percent instead of 2.0 percent. In the second quarter, annualized growth was 1.3 percent.

While that seems like a vast improvement at first glance, several analysts have pointed out there's underlying weakness when the details are examined. Here's Bloomberg's Justin Wolfers:

There's more than one way to measure economic output. The headline estimate of gross domestic product that you read so much about is the result of adding up all spending in the economy. Buried deep in the report is an alternative measure, known as gross domestic income, obtained by adding up all the income earned. In theory, measures of GDP and GDI should be identical, because every dollar spent by someone is a dollar earned by someone else. In practice, the two measures differ, because they are based on different source data. [...]

The latest GDI data tell a sobering story. In the three months through September, GDI grew at an annualized, inflation-adjusted rate of only 1.7 percent, compared with 2.7 percent for GDP. Historically, when we've seen divergences like this, it has been more common for the GDP estimate to be revised toward the GDI estimate. So future revisions are likely to show that GDP growth was a bit weaker than the current optimistic headlines suggest.

Perhaps more strikingly, GDI in the second quarter of 2012 shrank at an annualized, inflation-adjusted rate of 0.7 percent. Together with the disappointing third-quarter number, this suggests that over the past two quarters, real GDI has grown at an annualized rate of only 0.5 percent. By contrast, the headline GDP data have grown at an average rate of 2.0 percent over the same period. We don't know which is right, but there's good reason to fear that the pessimistic data are closer to the truth.

As Wolfers points out, the economic data have been "murky" for some time, moving in fits and starts. The economy is steadily growing, and has been since mid-2009, but the growth has not been enough to create new jobs anywhere close to the monthly 250,000-300,000 level that is required to put millions of unemployed people—counted and uncounted—to work. The majority of new jobs that have been created are of the low-wage type, forcing more than a few out-of-work Americans with extensive skills and decades of experience into positions that pay them significantly less with fewer benefits than they had prior to the beginning of the Great Recession in 2007.

What's most frustrating about the failure to enter into better job-creation territory is that until the acute problems associated the recession are resolved, we can't work on the chronic ones, some with origins more than 30 years ago and some the product of policies put into place by both Republicans and Democrats. Instead, any discussion of the benefits from more stimulus in a time of low interest rates and low inflation is submerged beneath the phony arguments about the fiscal "cliff" and the deficit.

Originally posted to Daily Kos Labor on Thu Nov 29, 2012 at 12:59 PM PST.

Also republished by Daily Kos Economics and Daily Kos.

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Comment Preferences

  •  Shrinking GDI???? (6+ / 0-)
    GDI in the second quarter of 2012 shrank at an annualized, inflation-adjusted rate of 0.7 percent. Together with the disappointing third-quarter number, this suggests that over the past two quarters, real GDI has grown at an annualized rate of only 0.5 percent.
    Holy crap. Shrinking GDI = deflation. The fact that we're flirting with deflation is yet more evidence that Krugman et al. are right--we need more deficit-fueled stimulus spending, pronto.

    "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

    by HeyMikey on Thu Nov 29, 2012 at 01:18:47 PM PST

  •  Thanks for this relatively good news. (4+ / 0-)
    Recommended by:
    elwior, a gilas girl, Zinman, paradise50

    Several economists, including Paul Krugman, have pointed out that because 2008 was not just a typical business cycle downturn, but a broader financial crisis, we should not expect a typical business cycle recovery.

    We also suffered from a longer-term trend of loss of manufacturing jobs to lower wage areas such as China, Mexico, and other parts of South-East Asia, where educational standards are higher. One statistic I remember from a decade an a half ago was that the average Asian high school student performs higher on test of math skills than the average American college graduate.

    I recently read China is investing over $1 trillion to expand its higher education systems with special emphasis on science, math, and engineering fields related to its industrial policy of dominating global markets for emerging high technology related industries such as solar photovoltaics, and other renewable energy technologies.

    As, much as we Americans have admired ideals of a purely free market and free trade, a directly predictable consequence will be a trend towards a global equilibrium of wages, to the extent all other things are equal.  

    But, they are not, as we see in education. One surprising advantage we have "redeveloped" is an advantage in energy costs for manufacturing.

    But, we need to carefully consider the possibility that the modern changing global competitive environment might require a greater role for government in our economic systems such as the infrastructure bank proposed by President Obama, and other stimulative programs such as modernizing our electrical grids, and accelerating the modernization of our aging traditional infrastructure.

    Also, after a major study found that the Republic of China's, (Taiwan's), industries were facing a competitive disadvantage due to expensive and inefficient employee based health insurance, their legislative and executive branches took one year to pass a single payer national health plan, and they computerized, and standardized all medical records at the same time.

    We in the United States need to wake up and smell the coffee! We can no longer afford the kind of stupidity, ideological rigidity, and backwards thinking among our political leaders, we know is silly, but we seem to find acceptable among or even entertaining.

    We no longer has success an overwhelming economic advantage over the other nations of the world that we can avoid thinking strategically and competitively.

    We may need to consider programs to revitalize our economy, infrastructure, and enhance the skills and education of our workforce and people of the same intensity we did with the Manhattan Project, and after Sputnik where government played a critical leading role.

    Having a national strategy for advancing our economy, education, and common good is not an evil to avoid, but a powerful tool for moving us forward.

    Any one who doubts this should ask an academic economist what they will predict will happen with nothing other than free markets, no trade barriers, and low transportation costs. Global equilibration of wages is just one of the unhappy trends we will need to adjust our expectations to in this default scenario.

    I still essential favor free flows of capital, trade, and information, however, believe we need to get smarter about the greater leadership role our government may need to play for us to remain competitive with other nations who have no doubt about this and are pulling all the stops they can to advance their economies and peoples.  

    Thanks for educating us and elevating the level of our discussions here MB.

    The means is the ends in the process of becoming. - Mahatma Gandhi

    by HoundDog on Thu Nov 29, 2012 at 01:28:29 PM PST

    •  Correction - My eight and ninth paragraphs veered (4+ / 0-)
      Recommended by:
      elwior, marsanges, Zinman, paradise50

      off course as I was thinking about how to "land" this comment "breifly."

      "among" should be removed in eight.  And, nine should read "We no longer have such an overwhelming economic advantage.... "

      Sorry, but please remember "diversity is often a good thing." Tolerating people whose minds are thinking ahead, while their fingers do their best to keep up, may turn out to yield advantage later one day.

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Thu Nov 29, 2012 at 01:35:44 PM PST

      [ Parent ]

    •  taiwan's health care system works really well (4+ / 0-)
      Recommended by:
      a gilas girl, a2nite, Zinman, HoundDog

      quality care delivered at a much lower price than the highway robbery that is american health insurance.

  •  If ONLY we had a trad med that (1+ / 0-)
    Recommended by:

    actually gave us news and educated the public.....oh wait, that is exactly what the GOP DOESN'T want. So what will the Dems do for us? crickets....

    American Television is a vast sea of stupid. -xxdr zombiexx

    by glitterscale on Thu Nov 29, 2012 at 01:56:25 PM PST

  •  but the serious people (1+ / 0-)
    Recommended by:

    say we have to punish people in order to fix the economy. other people. not the serious people themselves. because the economy can't be fixed without lots of suffering by those other people. and you can't be a serious people unless you understand that we have to destroy the economy in order to fix the economy.

    The cold passion for truth hunts in no pack. -Robinson Jeffers

    by Laurence Lewis on Thu Nov 29, 2012 at 08:25:04 PM PST

  •  thoughts (1+ / 0-)
    Recommended by:

    1. GDP data was weaker than the headline. A build in inventories contributed an outsized amount. Unless sales are growing (but consumer spending was weak), this will get reversed in subsequent quarters, pulling down GDP.

    2. One of the big problems is that there is too much debt in the economy. The other problem is that while the government is borrowing at close to 0%, those with student loans, or payday loans or credit card bills are paying much higher rates. We also say another increase in student debt defaults. We need to find a way to get cheap money to those with debts (so payments can go to principal not interest).

    3. The best that can said about the economy is that it has stabilized. But to do this the cost has been high ... and the danger of pulling away the crutches is definitely still there. The problem will when do you pull away the crutches (payroll tax holidays, bush tax cuts) if the economy refuses to grow more quickly - as is likely.

    There's room at the top they're telling you still But first you must learn how to smile as you kill If you want to be like the folks on the hill

    by taonow on Thu Nov 29, 2012 at 08:32:26 PM PST

  •  Really good lecture (0+ / 0-)

    by steve keen, and timely

    Small varmints, if you will.

    by aztecraingod on Thu Nov 29, 2012 at 08:33:57 PM PST

  •  This is part of the explanation for (0+ / 0-)

    the "mysterious" (to Republicans) election results; the economy was better than the elites saw.

  •  solving the deficit will not solve jobs issue (0+ / 0-)

    It's more like the other way around!  When will these right wingers acknowledge reality?

    "The real wealth of a nation consists of the contributions of its people and nature." -- Rianne Eisler

    by noofsh on Fri Nov 30, 2012 at 03:55:30 AM PST

  •  What are the stats for how U3/U6 has changed. (0+ / 0-)

    Because first time jobless benefits could be decreasing either due to an improving economy or simply because so many people have applied for jobless benefits before that there are simply much fewer people who have never applied for jobless benefits before.

    You have watched Faux News, now lose 2d10 SAN.

    by Throw The Bums Out on Fri Nov 30, 2012 at 09:27:25 AM PST

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