Last week (8/29), there were 570,000 initial claims for unemployment insurance — down from 574,000 the week before, but that 574,000 was revised up from 570,000, so it really is about flat with last week.

The four-week moving average ticked up again, for the third week in a row now, but remains well below the peak set in mid-April. The current four-week average of 571,250 is 4000 above last week.

The Chart below (from puts the recent uptick in perspective. You have to look very closely to see it. I remain convinced we have seen the highs for the cycle, but we are probably in for a long period of jagged sideways movement. That was the pattern in the last two recessions, where initial claims stayed elevated for about two years after hitting their highs.

Historically, it has been the peak that has signaled the end of recessions, although I would be surprised if the NBER dates the end of this recession to April. July or August seem much more likely to me. Even if the recession is over, it does not mean we are going to have a healthy job market. A level of 570,000 new claims still indicates that the economy is losing jobs at a rapid clip.

We probably need to get under 400,000 new claims to indicate that the economy is adding jobs. Also, keep in mind that the population is growing, so we can’t really declare victory even when we get net job losses down to zero. We really need to be adding about 150,000 jobs a month just to keep up with the population treadmill.

Continuing claims are issued with a one-week lag. In the week ending 8/22, they rose to 6.234 million — a rise of 92,000. The picture is actually much worse than that since it contains only those people who are on regular state benefits. Those run out after 26 weeks. There were a lot of people getting laid off towards the end of February, and if they have not found jobs by now, they will be dropping off the rolls.

Those people, then, go to one of the extended unemployment benefit programs. These were part of the stimulus package and are paid by the Federal Government, rather than from the state unemployment funds.

Combining the two largest of these programs, there are 3.459 million people receiving extended benefits, an increase of 50,000 from last week (at least from what was reported last week, the numbers are one week behind continuing claims and two weeks behind initial claims). Thus if you ignore the one week lag, there are actually 9.693 million people getting unemployment benefits.

The extended benefits do not last forever, and we are soon going to start seeing large numbers of people (some estimates are as high as 1.5 million by the end of the year) who are going to have no (legal) income whatsoever. Those people have probably already drawn down their savings and maxed out their credit cards. They will probably not be able to afford even the subsidized COBRA (another Stimulus Package benefit) at that point. Heaven help them if they get sick.

Look for the number of bankruptcies to continue to soar. If they are homeowners, they will probably stop paying their mortgages, especially if they are underwater on their houses. Living rent-free until the sheriff shows up eases their financial situation somewhat, but what happens after the sheriff knocks on the door?

At least they have avoided that fate so far due to the Stimulus Package. Those who claim that the stimulus has had no effect ignore the very real benefits it has brought to these people.

Under these circumstances, is it any big surprise that the back-to-school shopping season was a bust for stores ranging from Saks (SKS) to Macy’s (M) to Abercrombie & Fitch (ANF). “Sorry Billy, your brother’s hand-me-downs are going to have to do. Keeping the lights on is more important than you looking cool.”

In the week ending Aug. 29, the advance figure for seasonally adjusted initial claims was 570,000, a decrease of 4,000 from the previous week’s revised figure of 574,000. The 4-week moving average was 571,250, an increase of 4,000 from the previous week’s revised average of 567,250.

The advance number for seasonally adjusted insured unemployment during the week ending Aug. 22 was 6,234,000, an increase of 92,000 from the preceding week’s revised level of 6,142,000.
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