The weekly unemployment insurance claims data is an important series to economists and forecasters. This is because it is one of the only real-time sources of economic data. Produced by the Bureau of Labor Statistics, the weekly jobs report, provides information on both initial claims for unemployment insurance and continuing claims. These data, therefore, provide a good estimate of the number of people who lose their jobs each week, as well as an indicator of how many people reenter the labor market. Generally, economists consider a figure below 400,000 to indicate a growing economy, and a figure above 400,000 as an indicator of recession.
The March 28 report showed that the number of new claims for unemployment insurance was an adjusted 357,000, up from 341,000 in the prior week and 334,000 during the first week in March. The less volatile 4-week moving average was also up slightly to 343,000. These figures suggest that the labor market continues to be sluggish, suggesting that overall growth in GDP during the 1st quarter would be low or even negative.
The number of people continuing to receive unemployment insurance (or the number of people officially unemployed) was at 3.050 million and including all government unemployment programs the figure was at 5.456 million. This is down sharply from January when nearly 3.9 million people were receiving state unemployment insurance, reflecting changes in legislation that removed many people from the rolls in January of this year.
Continued weakness in the labor markets is a reflection of the slow growth in the economy. Businesses are not interested in investing in new production, and when they do, they are focusing on automation and productivity increases rather than hiring new labor. There are a number of reasons for this including the high regulatory burden that the Federal and local governments place on firms hiring new employees. This increases the cost of labor above its productive value (particularly for people with lower educational levels) making it unprofitable to hire workers. In addition, the sluggish economy has reduced demand which again keeps businesses from investing.
Unemployment rates continue to fall but at a snail’s pace. Most of this decrease, however, is the result of people leaving the labor force either by going on permanent disability, or simply by cutting back. Until businesses feel more comfortable to invest in new projects unemployment will continue to fall as people leave the labor force, and claims for unemployment insurance will plateau in the 330,000-350,000 range.