New claims for unemployment insurance fell by 10,000 to 514,000, the lowest level since January.  The four-week average of new claims fell by 9,000 to 531,500.  The four-week average is now 127,250 below the peak set back in April.

Both the size of the decline and the time since the peak are powerful arguments that we have seen the high for the cycle. This is good news and more evidence that the recession is indeed over.

However, the level is still very high and indicates that the economy is still, on balance, dropping jobs. We need to see the number fall well below the 400,000 level to indicate that job growth has turned positive, and far lower than that to meet the needs of a growing population.

As the graph below (from shows in the last two recessions, new claims initally came well off their highs, but then lingered at an elevated level for well after a year,a reflection of a jobless recovery. I fear that is going to happen again.

On the continuing claims front, there was also some apparent good news — they fell by 75,000 to 5.992 million, the first time in many months that they have been below the 6 mlllion mark. However, the continuing claims only track regular state benefits, which run ot after 26 weeks. On average, people who are out of work have been looking for a job for over 26 weeks now, a situation that has not been seen since the end of WWII.

After the regular state benefits run out, then emergency Federal benefits kick in (a major element of the stimulus package). There are now more than 3.8 million people getting the extended benefits — up 16,000 from last week (one week behind regular continuing claims, and two weeks behind inital claims). Anyone who claims that the stimulus is not working needs to be able to look at those 3.8 million Americans and their families and tell them that they would be better off if they had no income at all coming in right now — that they are better off doing business at the local food bank rather than at Bank of America (BAC) or Chase (JPM).

Even those extended benefits do not last forever, and people are starting to drop off the roles.  Both the Senate and the House have passed measures to extend the benefits for a few more months, especially in high unemployment states, but they are still hammering out the differences in the bills, but it looks like something will be signed soon.  Perhaps that will mean that their kids will get things for Chistmas made by Hasbro (HAS) and not Peabody Energy (BTU).

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