Initial claims for unemployment insurance rose by 4,000 this week to 558,000. The four week average rose by 8,500 to 565,000. As the graph below shows (from, we are well past the peak, in both time and level. The peak of the four-week average was 18 weeks ago and 93,750 higher than we are today.

Historically, claims have peaked right near the end of a recession. Unless the NBER surprises us when they get around to dating the end of this recession, that does not appear to be the case this time. The rise in the four-week average could be the start of a pattern like we saw in the last two downturns, where initial claims started coming down sharply but then plateaued and remained elevated for an extended period of time.

The current levels are still consistent with the economy losing jobs. We will need to see the number get down in the vicinity of 400,000 before we see the economy actually add jobs.

There was some good news in the report, as continuing claims fell by 141,000 to 6.202 million. Some of that may be due to people simply “aging out of the system” as their benefits are exhausted. However, that does not appear to be the case.

The continuing claims number only covers the regular state unemployment programs. The extended benefits are tracked separately. There is a bit of a time lag, though, as the continuing claims data is a week delayed from the initial claims data, and the extended benefits data is a week behind continuing claims and two weeks behind the new claims data.

In any case, the number of people on extended claims rose by only 31,000, to 2.785 million, well below the drop in regular claims. This could actually be an indication that people are leaving the continuing claims pool the right way, by finding jobs, rather than simply running out of benefits. The other possibility (there is probably some of both, but no good data on the relative numbers) is that people are exhausting their extended benefits.

That makes a huge difference. If there are large numbers of people who have run out of even the extended benefits, they have probably also run through their savings and are on the road to serious poverty. It is highly likely that when they do find a job it will be at a substantially lower salary than they used to make. The longer you are out of work, in general, the lower the relative starting salary at your next job.

While we got very good news on the unemployment front in the July employment report last week, unless we see more progress on the initial claims front, it is unlikely that the momentum will be continued in August. The July report was only good relative to expectations and the previous months. Losing a quarter million jobs in a month is hardly a good thing, especially if you have a growing population.

On the other hand, losing a quarter of a million jobs sure beats losing a half a million jobs. What the country really needs is to be gaining a quarter million jobs a month, and to do so on a consistent basis. It’s not impossible — in fact, it is what Clinton managed over the eight years of his administration.

After a string of relatively upbeat economic news, this was a bit of a disappointment. Coming out of a recession, the data does not tend to move in a straight line; rather, the data dances, with a few steps forward and then a few steps back. Not all parts of the country, or the economy will recover at the same time.

Companies have been able to report better than expected earnings, but have had a very hard time on the top line. The difference has been cost cutting, and cost cutting usually means laying people off. When everybody is laying people off it means that revenues will be further depressed because the unemployed do not spend as much as people with jobs.

For the individual company, the cost cut of laying someone off is greater than revenue loss from that worker spending less on the company’s products. Collectively, though, it contributes to lower economic activity and thus revenues for almost all companies.

However, that will not be spread evenly, since people will continue to spend on staples like toothpaste and soap from Colgate-Palmolive (CL) or Procter & Gamble (PG) but not spend on discretionary items like travel, which hurts Airlines like Southwest Air (LUV) and hotel companies like Marriott (MAR).

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