U.S. Labor Market Strain Persists

August 20, 2009

576K workers filed initial jobless claims in the week to August 15, 26K more than expected.  That was the biggest overshoot relative to forecasts in this layoff rate proxy in at least two months.  The four-week average of new jobless claims rose 4.25K to 570K, highest since the week to July 3.  This series peaked at 648.75K in the four weeks to April 4 but remains above early January levels.  Historically, any result above 400K is associated with a growth recession, if not a full-fledged downturn.  Opinion is now divided over whether the jobless rate eventually peaks under or above 10%.  I believe it will be the latter.  If that doesn’t happen, it will be because long-term unemployed workers stop looking for work.  And if that happens, a falling unemployment rate will not be associated with the kind of income and consumer spending growth one might expect to see.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.



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