We got some good news as Initial Claims for Unemployment Insurance
fell by 14,000 last week to 460,000. However, it is not good enough. If one factors in the upward revision to the previous week's number the decline is only 11,000, and that hardly makes up for the 28,000 (post revision) increase a week ago.
Since the week-to-week numbers can be noisy and volatile, it is generally better to look at the four-week moving average to get a better sense of the overall trend. This is tracked in the graph below (from http://www.calculatedriskblog.com/
After a massive and steep decline starting in April of last year, and continuing through New Year's, the trend of initial claims has become very erratic. This is starting to look like a replay of what happened after the last two recessions, when after a steep initial decline initial claims remained on a high plateau for a very long period of time. Those periods coincided with jobless recoveries.
The four-week moving average increased by 2,250 this week to 456,500. That, however, is still a huge improvement over the 616,250 level of a year ago. But if we are going to make a serious dent in the unemployment rate (currently at 9.9% for April, May data due out next Friday), we probably need to see the four-week moving average fall below the 400,000 level and stay there.Continuing Claims
The news on continuing claims was a bit more upbeat. Regular continuing claims fell by 49,000 to 4.607 million, and have been in a steep downtrend of late. A year ago they were at 6.4898 million, so over the course of the year we have seen a 29.1% decline.
However, regular continuing claims do not tell the whole story, not by a long shot. Regular claims are paid by the state unemployment insurance funds, and last for only 26 weeks. In April, 45.9% of all of the unemployed had been out of work for longer than that.
After 26 weeks, people move over to the extended claims programs, which are paid for by the federal government as part of the stimulus package. In the current report, extended claims were virtually unchanged with a decline of just 3,000 to 5.339 million.
While regular continuing claims might have dropped over the last year, the same is not true for extended claims. The have more than doubled from last year's level of 2.585 million.
Thus, a better way to look at things is the total number of people getting unemployment benefits.