Initial Claims for Unemployment Insurance plunged this week after having poking its head above the 400,000 last week.. This week they fell by 23,000 but only after the previous week was revised up by 2,000. So regardless if you count it as a drop of 23,000, or 21,000, we are still at 381,000. That was significantly better than the expected level of 395,000. Falling back under the 400,000 mark is in particular good news, since it is a psychologically important round number, and also one that historically has marked the dividing line between anemic and robust job growth.
Since the week to week numbers can be very volatile, it is best to watch the four week moving average to get a sense of the trend. It fell by 3000 to 393,250. Relative to a year ago it is down by 37,000 or 8.6%.
Regular continuing claims also fell sharply, down by 174,000 for the week to 3.583 million. They have been in a steep downtrend and are down by 543,000 or 13.2% over the last year. Regular claims only last 26 weeks and are paid for by State Unemployment Compensation Funds. After that, people move over to extended claims, paid for by the Federal Government. Those fell by 211,000 to 3.310 million for the week, and are down by 1.167 million, or 26.1% over the last year. In November, 43.0% of all the unemployed had been looking for 27 weeks or more. So one has to consider both regular and extended claims.
There are some timing issues between regular and continuing claims, but the total number of people getting benefits fell by 431,000 on the week, and are down 1.722 million, or 20.8%.
This report was clearly good news on all fronts. The longer term trends are clearly in the right direction, and this week was an acceleration of those trends. I would note that the vast majority of economists see unemployment insurance as among the most effective economic stimulus measures around on a dollar of dollar basis, since the unemployed are the most likely to immediately spend the money and get into circulation.
As things stand now, all 3.310 million now getting extended benefits will be left with no income at all on January 1, 2012, unless Congress extends the benefits. The Obama proposal would not increase the current maximum benefit duration, but would mean that those who have been out of work for more than 27 weeks but less than 99 would continue to get benefits. It is highly unlikely that those 3.310 million people are going to find work between now and New Years Eve. That means that they will be thrown into abject poverty. That is not good for them, nor is that good for the either the economy or social stability.
