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Jobless claims fall at a higher than expected rate

The Labor Department reported that new claims for unemployment fell to their lowest levels since September, 2008. The seasonally adjusted claims fell by 22,000 to 432,000 which represents a larger than expected drop. This looks good for the long term. New jobless claims fell for 17 straight weeks which is a great sign that economic recovery might actually spur new job creation soon. The hope is that newly employed people and those who held their jobs will have renewed confidence in the economy and begin pumping in more of their dollars to help snowball the economic momentum.

Lower four week average shows signs of improvement

Initial unemployment claims are tracked very closely by the Labor Department and analysts. These numbers are gathered and analyzed weekly, but to smooth out statistical highs and lows a four week average is used. The most recent average indicates a drop in claims from the high last spring of 674,000 to 460,250. Additionally, the number of people already receiving benefits dropped by 57,000 to 4.9 million. This drop was also better than what analysts had anticipated. The pace of layoffs is more telling to analysts than the actual numbers. The number of people receiving unemployment is staying high, but the rate that jobs are being cut is slowing.

Federal claims curb some of the enthusiasm

The number of initial claims falling does not tell the whole story, however. States pay 26 weeks of unemployment usually and benefits beyond that come from the federal government. Some of the drop in the number of people receiving benefits represents a shift from the initial 26 week claims to the federally funded extended benefits. The number of people receiving extended benefits rose by approximately 200,000 in the second week of December compared to the previous week. This was in part due to Congress extending benefits in November. President Obama extended federal unemployment benefits through February, 2010. This move prevents 2 million people from running out of benefits in January, but a total of 3 million people will now run out of federal benefits by March of next year. It isn’t certain that benefits will be extended beyond March. The state and pace of the economic recovery at that time will have a lot to do with the fed’s decision.

Recovery not happening for everyone

The country is experiencing its worst recession in the past quarter century. The recovery is beginning to happen in general but not everywhere. For instance, employers cut the least amount of jobs in November in over a year. 11,000. That said, the number of new claims in Michigan rose by 8,362 mostly because of the woes of the auto industry, and Michigan’s difficulty in attracting new industry. Michigan isn’t alone. California, Florida, Iowa, and Missouri saw increases as well. Tennessee saw the largest decrease in claims – 2,972. Several other states experienced decreases as well. Statistics for unemployment in December are due by January 8th, 2010. Continued improvement will boost confidence over this year.