First-time unemployment claims fall. 2.1 million Americans face end-of-year benefits cut-off

Seasonally adjusted first-time unemployment benefit claims for the week ending Dec. 8 fell to a 58-month low of 343,000, according to Department of Labor statistics released Thursday. For the comparable week of 2011, the number was 371,000. The latest number was a decrease of 29,000 from the revised 372,000 claims posted the previous week. Not only does this indicate the impact of Hurricane Sandy on first-time claims for unemployment benefits has been shaken off just five weeks after the storm ravaged the east coast, but it's also an encouraging sign for the labor market overall. But there are caveats.

Post-Hurricane Sandy claims peaked at 451,000 the week ending Nov. 10 and have been dropping steadily since then. A better gauge that flattens volatility in the weekly figures is the four-week running average. That number also fell, to 381,500, which was 27,000 less than the previous week.

For the week ending Nov. 24, the number of people claiming benefits in all programs, including extended "emergency" benefits funded wholly by the federal government, was 5,642,678, an increase of 683,477 from the previous week. For the comparable week in 2011, the total number claiming benefits was 7,449,508.

But if Congress and President Obama do not reach an agreement on the fiscal impasse, some 2.1 million of those Americans will lose their benefits as of Dec. 29. Another 900,000 will lose their benefits if no agreement is reached by April 1.  

Throughout 2012, first-time claims have mostly stayed within a range of 360,000-380,000. That's a reflection of what is still sluggish growth in employment. If the 343,000 number indicates a move to a new plateau, that would be a good thing. But, as always, the holiday season is a bad time to make bets on the long-term trend of claims. Especially so given the bigger jobs picture.

Although the Bureau of Labor Statistics reported last Friday that a seasonally adjusted 146,000 new jobs were created nationwide in November, a better than expected performance, revisions for job creation in October and September were downward. To bring the unemployment level from its current 7.7 percent to where it was at the beginning of the Great Recession by the end of 2014 would require new job creation averaging about 270,000 a month.

In the first two months of 2012, that was exactly what was happening. Predictions of a rosy year for the labor market were everywhere. But they didn't last.

By the second quarter, seasonally adjusted job growth was in double digits. And, while job growth rose appreciably in the summer, it remains at about half what is needed for a quick return to the relatively healthy pre-recession numbers. Meanwhile, 12 million Americans are still officially unemployed. And when you count those who are underemployed and those who say they would like a job but are so discouraged they have stopped looking for one, the figure rises to 27 million.

The slackness in job growth is reflected in the sluggish growth of the gross domestic product.

Predictions are that growth in inflation-adjusted'"real"'GDP calculated on an annualized basis is going to clock in around 1.2 percent for the fourth quarter of 2012. That would mean GDP growth for the entire year would be about 1.7 percent. Which is below the 1.8 percent of 2011, which itself was a drop from the 2.4 percent in 2010. Earlier predictions that 2013 would be significantly better have recently been revised downward. They are now mostly predicting it will fall below 2 percent for at least the first half of 2013.

Not at the Federal Reserve, however. On Wednesday, it released projections of GDP growth for next year of 2.2 percent to 3.0 percent and official unemployment of 7.4 percent to 7.7 percent. As a consequence wholly expected by "the market," the Fed has decided to move ahead with a fourth round of quantitative easing. It will keep interest rates near zero until the unemployment rate reaches 6.5 percent and seek to hold inflation within a half of a point of its long-term 2 percent target. Keeping the interest rate down will entail continued purchases of Treasury securities in the $40 billion a month range.

Given that the Fed's projections of GDP growth over the past few years have been consistently over-optimistic, there's good reason to believe that this so-called QE4 could last a long time. The question is whether it will finally break the economic logjam. There are, as there have been for more than two years, mixed signs. Housing finally seems to have hit bottom and prices are rising in some markets. Since housing construction has been a big driver of past economic recoveries, this could be a good omen. Retail sales, also a big driver, were reported up 0.3 percent in November over October. But in October, they had fallen 0.3 percent.

As usual for the past couple of years, the news is up and down, and uncertainty, even without mention of the fiscal impasse in Washington, is rife. While all these acute economic matters remain unresolved, the chronic ones'income inequality, wage stagnation, off-shoring of jobs and a host of others'have yet to be touched. Nor are they likely to be until economic recovery reaches far more people than it has yet done. We keep hearing that this outcome is just around the corner, just as we have since early 2010.