July 10, 2003

More Bad Unemployment News

Still more bad unemployment news. The highest number of people drawing unemployment insurance since February 1983:

Jobless Claims Rise by 5,000: ...More American workers signed up for unemployment benefits last week, fresh evidence that businesses are keeping work forces lean and playing it safe until the economy shows clear signs of improvement.

The Labor Department reported Thursday that for the work week ending July 5, new claims filed for unemployment insurance rose by a seasonally adjusted 5,000 to 439,000, the highest level since the week ending May 31.

The increase surprised economists who were forecasting a decline in jobless claims.

For 21 weeks in a row, the level of claims has been above the 400,000 mark, a level associated with a sluggish job market.

The number of out-of-work Americans continuing to draw jobless benefits jumped by 87,000 to 3.8 million for the work week ending June 28, the most recent period for which that information is available. That represented the highest level since Feb. 26, 1983, and suggested that not a lot of hiring is taking place...

Posted by DeLong at July 10, 2003 08:12 AM | TrackBack

Comments

What puzzles me is the significant denial that there is a serious problem in the labor market. First, it was snow. Then, war. Then, "merely" a continuing decline in manufacturing employment. Then recovery is here, but employment is always a laggard. Not to worry, people are actively looking for work again. Not to woory, corporations are going to be investing lots.

The stock market is telling us there is a boom to come and come soon. The labor market is telling us we are in for a sadly long period of slow growth, and slow growth in a high productivity enviornment will add to labor market pressure.

Posted by: anne on July 10, 2003 08:44 AM

Now that's odd...the week ending July 5 had a federal holiday in it (July 4), so doesn't that make this increase even more ominous? (If memory serves, in the past it has been noted that 4-day weeks have an effect on claims numbers, but do they attempt to correct for this statistically?

Posted by: Jonathan King on July 10, 2003 08:46 AM

http://www.nytimes.com/2003/07/10/business/10DRUG.html?hp

As soon as the last 3 tax cuts take up up up we go. Mom is especially thrilled by money saved on dividend taxes. Almost enough to make up for the fine rise in drug prices for the 50 most widely prescribed drugs for older women and men. Triple the rate of inflation, but they got got those extra dividends Go after them oldies.

Posted by: lise on July 10, 2003 09:30 AM

Seeing these continuing bad reports and the continuing reassurances one sees in the popular press, I am just at wit's end.

In my most pessimistic moods, I imagine that critics of the President begin beating him with the poor performance of the economy, but that the economy picks up in the fourth quarter (five months is a long time) and then really starts rolling in the 2004. That man in the white house then claims full credit for the recovery (that's what politicians do) and the people are willing to believe.

As a result, we have to wait four more years for a chance to undo the serious damage he is doing by building the debt and slashing at whatever progressivity exists in the federal tax structure.

As Brad would say, sigh.

Posted by: Ted on July 10, 2003 09:33 AM

"The increase surprised economists who were forecasting a decline in jobless claims."

Somebody is trying to discredit our profession... :-) Or thinks investment bank financial advisors are unbiased economists...

Posted by: Jean-Philippe Stijns on July 10, 2003 09:46 AM

The new claims series gets most of the attention, but it is the continuing claims series that is really putting on a show. New claims are noted to be continuing above 400,000 for an extended period. Continuing claims are at the highest level for this cycle, maybe forever - I don't have data back further than the early 1980s. That matches pretty well with the rise in the durable of unemployment in the monthy household survey, with the average now near 20 weeks, vs just above 12 weeks in mid-2001. There is a pretty steady stream of job loss, as represented by new claims. The problem is there is not a similar steady stream of people off the jobless roles (till benefits run out), which is why the continuing claims and duration series are so high.

Posted by: K Harris on July 10, 2003 09:52 AM

"Continuing claims are at the highest level for this cycle, maybe forever.... The problem is there is not a similar steady stream of people off the jobless roles (till benefits run out), which is why the continuing claims and duration series are so high."

Just so.

Anne

Posted by: anne on July 10, 2003 10:07 AM

Howard Dean and the other dems better start getting on the "economy stupid" train pretty quick.

Posted by: mike on July 10, 2003 10:35 AM

There's a good article on 'jobless recoveries' at the Federal Reserve Bank of Kansas City. I have a link on my site if you're interested. Basically, in these jobless recoveries, employers are still cutting full-time permanent employment, substituting more flexible labor in the form of overtime and temp employees. This has several implications for the greater economy, including reduction in consumption by employees who are temps or part-timers, thus not consuming enough to speed up the recovery.

Posted by: Datanerd on July 10, 2003 11:16 AM


Hi Ted:

On the more-cynical-than-thou note - I wouldn't hold my breath for a recovery. (To beat my usual drum) From where will a rise in aggregate demand come? It isn't going to come from surging economies in the developing world, which are depend on exports. Nor is Europe or Japan likely to pick up the slack from falling domestic consumption. Business investment, mentioned by right-wing idealolgues dressed up as economists, will not materialize because there is overcapacity now.(individual businesses might invest and thrive, but the macroeconomic outlook will not improve. So save your breath with "but my business is doing really well" responses.)

According to my calculations, for the next year, unless something dramatic changes, we're going to limp along at about 2.8% growth. Which means that unemployment could rise as high as 8% by the end of the year.

Posted by: SZ on July 10, 2003 11:30 AM

Ah, just more news for the irrational bears to ignore. Just like they'll ignore yesterday's reported drop in wholesale sales and inventory, and other bad news will be be spun like this story on lower-than-projected sales:
http://www.nytimes.com/aponline/business/AP-Retail-Sales.html

You don't wanna be left by the Wall Street Express, do ya?

Posted by: Bragan on July 10, 2003 11:55 AM

The S&P had a p/e ratio of 31 on June 30. What does that mean, and then there is the NASDAQ. Just what is EBay worth anyway?

Posted by: bill on July 10, 2003 12:06 PM

"The highest number of people drawing unemployment insurance since February 1983"

Gee, not single person has commented on the growth of the number of people in the labor market since 1983. I mean, just for perspective's sake?

If you go back far enough, I bet the number of people unemployed today exceeds the entire number of people working in the US outside agriculture. (maybe in it too?)

"Worst economy since 1798!"
~~

"dems better start getting on the "economy stupid" train pretty quick."

Oh, I'm sure they'll be loading up at the train station soon enough. ;-)


Posted by: Jim Glass on July 10, 2003 01:05 PM

The Fed interest rate change was accompanied by a line that read "there is no evidence of sustained growth." The slow growth condition leaves us with a more and more significant employment deficit which in turn slows growth.

Posted by: dahl on July 10, 2003 01:06 PM

The Kansas City Fed article helpfully referenced by datanerd makes many interesting points. Among them, it compares post trough employment and output trends for the early 1990s cycle and the early 2000s cycle, finding that, in pure output terms at least, this recovery is actually ahead of its predecessor.

At any rate, if there is to be a recovery in capex, there had better be a recovery in earnings, and that is more likely, sorry to say, if businesses have even greater success trimming labor costs.

Posted by: Jim Harris on July 10, 2003 01:22 PM

I heard somewhere that if we ignore
California unemployment is actually
dropping.

So just what is the deal in California?

Posted by: Mark Amerman on July 10, 2003 01:36 PM

"What puzzles me is the significant denial that there is a serious problem in the labor market."

Actually I think there has been significant coverage of the weak job market in the media and how how the current problems are different than those in the past. What has been missing has been discussion in Washington and in public policy circles as to what can and/or should be done about it.

The plus side of that is there have not been calls for draconian anti trade or anti immigration measures as we have seen in the past.
But on the down side I do think the federal government can play a constructive role in boosting the job market. Two areas I would like to see examined are:

1. How can create a climate that makes employing people more attractive. One thing I liked about Gephardt's health care proposal is that it would really reduce the cost of employment by reducing employer's benefits costs. Would like to see less expensive proposals that might have some of the same beneficial effects and spur more new employment as opposed to just subsidizing current employment.

2. Curtail abuses of worker visa programs. I think immigration is great and bringing in skilled immigrants is highly beneficial, but I think the current programs are too easily abused to bring in people to slash wage expenses as opposed to bringing in people because they have really strong skills and/or abilities that help expand the pie.

And I am sure there are any many other ideas that really should be considered at this point. Though old style New Deal job programs would be excessive in my opinion, some selective additional public works projects probably make sense.

Posted by: Joe Blog on July 10, 2003 02:17 PM

"Gee, not single person has commented on the growth of the number of people in the labor market since 1983. I mean, just for perspective's sake?"

1983: participation rate 64%
1983 02 110 634 000 employment
1983 02 11 545 000 unemployed
1983 02 10.4% rate

2003: participation rate 66.5%
2003 06 147 096 000 employment
2003 06 9 358 000 unemployed
2003 06 6.4% rate

Ok. Things need to deteriorate a lot further before we reach 1983 levels.
The big negative today is that the Fed is done easing the money supply. In 1983 I think they still had plenty of ammunition left.
This leaves fiscal policy. How long is it reasonable to wait for the tax cut to work?

Posted by: Scott McArthur on July 10, 2003 03:08 PM

Washington Post - Numbers about to be cooked.
http://www.washingtonpost.com/wp-dyn/articles/A40357-2003Jul10.html?nav=hptoc_b

That smell is the smell of numbers being cooked. Commentary on my site on how they should substitute Year on Year full time employment for the pay roll data to track contractions.


As for recovery, you don't have recoveries from financial panics....

Posted by: Stirling Newberry on July 11, 2003 07:19 AM

" How long is it reasonable to wait for the tax cut to work?"

Which tax cut. Since March 2001 corporations have cut more than 3.1 million jobs. Cutting Warren Buffett's taxes will make little difference, even to Warren.

Posted by: anne on July 11, 2003 10:31 AM

" How long is it reasonable to wait for the tax cut to work? "

How long have you been beating your wife?

Posted by: Andrew Boucher on July 12, 2003 02:14 AM

http://www.nytimes.com/2003/07/12/business/12RACE.html?hp

Blacks Lose Better Jobs Faster as Middle-Class Work Drops
By LOUIS UCHITELLE - NYTimes

Unemployment among blacks is rising at a faster pace than in any similar period since the mid-1970's, and the jobs lost have been mostly in manufacturing, where the pay for blacks has historically been higher than in many other fields.

Nearly 2.6 million jobs have disappeared over all during the last 28 months, which began with a brief recession that has faded into a weak recovery. Nearly 90 percent of those lost jobs were in manufacturing, according to government data, with blacks hit disproportionately harder than whites.

At the same time, jobless black Americans have been unusually persistent about staying in the labor force. Having landed millions of jobs in the booming 1990's, they have continued to look for new ones in the soft economy, and so are counted now as unemployed; if they gave up trying to find work, they would not be counted.

These two phenomena help to explain why the black unemployment rate, though still not high by historic standards, is rising twice as fast as that of whites, and faster than in any downturn since the mid-1970's recession....

Posted by: lise on July 12, 2003 07:51 AM
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