Today’s new benefits claimants report from the US Labor Department indicates that the number of new unemployment benefit claims made last week increased by only 1,000 compared to the previous week. This – together with the fact that the four-week average of claims has now fallen for eighteen straight weeks – has some suggesting that the US economy is about to reverse the rate of job losses and will soon start creating new jobs. Personally, I believe this is a bit optimistic.
Certainly, the rate of job losses has slowed, and despite the statistically insignificant increase from the previous week, a total of 434,000 new jobless claims were made during the last four weeks alone. Tomorrow’s Non-Farm Payroll report is expected to confirm that unemployment continues to grow with December’s unemployment rate pegged to rise slightly to 10.1 percent from November’s 10.0 percent.
Unfortunately, January is historically a bad month for workers in the US. The coming of the new year also marks the end of the holiday season and many employers – ranging from the hospitality industry to the auto sector – typically see a downturn once the gift-buying and partying comes to an end. I would be very much surprised if the number of jobs created in January manages to outpace the number lost and I expect the overall results to be considerably worse than December’s results.
Taking a closer look at the current numbers, there are still nearly five million people in the US receiving unemployment benefits, with another five and half million receiving extended benefits. Congress provided these “emergency†benefits by extending the length of the standard benefits term four times since the recession griped the country to help those that found themselves having used all their benefits, yet still unable to find another job.
Despite the occasional glimmer of hope, the reality is there are still far more jobs being lost each day in the US, than are being created and there is no saying when this will change. Federal Reserve Chairman Ben Bernanke has warned that unemployment is likely to remain above 10 percent until at least the end of 2010, and on this, I have to agree with the Chairman. It will take more than one month of “decent†employment news to signal an end to the crisis on the jobs front and pave the way to recovery.
