We got some mixed news as Initial Claims for Unemployment Insurance fell by 3,000 last week to 456,000. However, it is not good enough. If one factors in the upward revision to the previous week's number, it is actually an increase of 3,000. The decline was also much smaller than consensus expectations, which were looking for a level of 450,000 new claims.
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 2010, the trend of initial jobless 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 decline at first, initial jobless 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 2,500 this week to 463,000. That, however, is still a huge improvement over the 612,250 level of a year ago. If we are going to make a serious dent in the unemployment rate (currently at 9.7% for May) 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 jobless claims was a bit more positive. Regular continuing jobless claims fell by 255,000 to 4.462 million, although that, too, is from an upwardly revised figure from last week. Based on the original number, the decline is 202,000, which is still pretty good.
Regular continuing jobless claims have been in a steep downtrend of late. A year ago they were at 6.543 million, so over the course of the year we have seen a 31.8% decline. However, regular continuing jobless claims do not tell the whole story, not by a long shot.
Regular jobless claims are paid by the state unemployment insurance funds, and last for only 26 weeks. As of May, 46.0% of all of the unemployed had been out of work for longer than that.
After 26 weeks, people move over to the extended jobless claims programs, which are paid for by the federal government as part of the Stimulus Package. In the current report, extended jobless claims were up 69,500 to 5.390 million.
While regular continuing jobless claims might have dropped over the last year, the same is not true for extended jobless claims. They have almost doubled from last year's level of 2.765 million.
Thus, a better way to look at things is the total number of people getting unemployment benefits. On that basis, the number of people getting benefits is 185,000 lower than a week ago, and 544,000, or 5.8%, higher than a year ago.