Yesterday we got word that the Fed now expects the U.S. unemployment rate to hit between 9.8% and 10.1% by the end of the year before starting to decline in 2010. In April, the Fed thought we’d top out between 9.2% and 9.6%. No cause for celebration there.
But then this morning we received a glimmer of hope from the Department of Labor: new unemployment claims dropped 8.3% last week from the week before, and continuing claims were down 9.3%. This came with a big caveat about the auto industry. Heading into bankruptcy, G.M. and Chrysler accelerated some seasonal plant shutdowns (they normally shutter plants in July to switch up the equipment). Since those layoffs aren’t hitting right now, like they typically would, the data looks better by comparison. There’s a fair chance that once this period passes, jobless claims will start creeping up again. Still, a bunch of analyst-types were decently sanguine about the turn the numbers have taken.
In trying to sort through the two signals—unemployment worse/unemployment better—I’ve taken a moment to remind myself that there’s a difference between companies pulling back on the layoffs and companies actually going out and hiring.
In the most-recent employment situation summary from the BLS there was some troubling news on this count. In June, the average unemployed person had been without a job for 24.5 weeks—compared to an average of 22.5-week job search the month before. In June, some 29% of people out of work had been looking for 27 weeks or more. A year ago, only 19% of people went without work for that long. Normally, unemployment insurance runs out after 26 weeks.
Now, the federal government did extend unemployment benefits, and in this morning’s Department of Labor numbers you can see that some people are taking advantage of that. But I can’t help but wonder exactly how many people we’re losing track of in the jobless claims numbers, much as we do “discouraged” workers in the unemployment rate.