Weekly Jobless Claims Jump to 454,000 | Business

Getty Images

Should we worry about the numbers out today showing that jobless claims have surged to 454,000 thousand, up from 403,000 the week previously? That’s a large jump, one of the biggest in recent memory. At the same time, there’s some new data showing that orders of big new equipment and machinery are down, which hints at future job losses.

The answer is no – it’s not time to worry, yet. Terrible weather throughout the Midwest and East Coast has skewed the figures, and the underlying data shows the labor market to be steady as she goes, on track to generate the 100-125,000 jobs a month that we need to at least hold the unemployment rate steady. Getting it down will require around 135,000 new jobs a month for quite some time, a questionable proposition – companies are still sitting on cash, and there’s even evidence that despite all the Immelt chatter about bringing jobs home, a number of American multinationals are actually speeding up outsourcing to emerging market nations post recession.

For a sense of where the economy is headed, the number to watch is next week’s unemployment report, out on Friday. That’s going to include the annual revision to historic jobs data. If that revision shows that even fewer jobs were created during the recovery than we thought (a distinct possibility), it could have important effects – not so much on the unemployment rate itself, which will probably be flat or only slightly up – but on the direction of economic policy in the U.S. As Paul Dales of Capital Economics notes, fewer jobs created will mean the Fed will probably push full steam ahead with “quantitative easing,” or the buying up of stocks and bonds—the very thing that inflation hawks worry could lead us down a 1970s style path of stagflation. Stay tuned.

waynebernard

In actuality, the Federal Reserve’s QE2 program is window dressing and is most likely way too little way too late to stimulate corporations to create jobs. The impact of having a $14 trillion debt on the American economy is going to be far greater and bondholders will ultimately demand higher interest rates whether Mr. Bernanke likes it or not because investors will perceive that U.S. bonds are increasingly risky. As it stands now, the interest on the debt alone reached an astonishing $148 billion for the first three months of fiscal 2011. In the first three months, interest owing has already reached 35 percent of the $414 billion owed in fiscal 2010 despite generational lows in interest rates.

The Congressional Budget Office calculates that, under their best case scenario, interest payments could rise to 4 percent of GDP (or one-sixth of total federal revenues) by 2035. Interest payments, which absorb federal resources that could otherwise be used to pay for government services, currently amount to more than 1 percent of GDP. Under their worse case scenario, interest payments on the debt will amount to 9 percent of GDP or one-third of federal revenues.

All of these factors conspire against the ability of the government to alleviate the unemployment situation by creating jobs in the future.

Here is a look at the looming debt interest crisis:

http://viableopposition.blogspot.com/2011/01/interesting-look-at-interest-on-us-debt.html
http://vaengineer.wordpress.com vaengineer

“….If that revision shows that even fewer jobs were created during the recovery than we thought….”

It is becoming like bad grammar to me when I read articles that refer to ‘the recovery’ like it is annointed as a fact. Take away the government deficit spending and are we really in a recovery? I understand all that about the consecutive quarters of increased GDP, but I don’t think most people with critical thinking skills buy that.

Something else is going on besides the typical upwarding trending business cycle that everyone is taught in Economics 101 and we count on professional journalists to dig deeper for the real truths.
tanboontee

You mean 454 thousand, not 454,000 thousand which is 454 million.

The argument does not seem to be that convincing.

In fact, like before, the number in the next unemployment report can be equally confusing if not misleading.
(vzc1943)