Economic Update:  Unemployment Claims Point to Continued Labor Market Stress

05.21.2010

New claims for unemployment are certainly down from highs of last year.   Claims peaked in early 2009, and have been trending down ever since.   New claims now appear to have reached a floor however, with post recession claims being approximately 100,000 higher than pre-recession unemployment claims.   Additionally, the Department of Labor announced yesterday that new claims for unemployment unexpectedly increased by 25,000 to 471,000.  

While the private sector is now beginning to add jobs, higher post recession claims will continue to exert upward pressure on the nation’s unemployment rate.

Local claims for unemployment have also trended down from 2009 highs.  There was a resumption of increases earlier this year, but these claims have been trending down since.   Local new claims are now at the level that existed at the start of the recession.  However, continuing claims are at a level that continues to exceed the level of continuing claims that existed at the start of the recession.  While duration of unemployment is not available at the local level, higher continuing claims may reflect the duration of unemployment for some at the local level. 

Alarm Bells

Activity in the bond markets is now sounding alarm bells.  Increased risk aversion throughout the global economy is causing investors to once again seek the safety of U.S. Treasuries, and this is reflected with declining yields.  

  10 Year Yield

Source:  www.barrons.com

The U Shape Recovery Update

I have been calling for a U shape recovery for quite some time.  While we have begun to add private sector jobs, there are continued risks for slow growth.   I do believe we will continue to add private sector jobs, and that positive growth in GDP will continue.  However, the U shape recovery suggests that the economy will see slow growth.   Housing will continue to be a drag on the nation’s economy, and while the consumer appears to be re-emerging from hibernation, continued labor market stresses will serve as headwinds to consumer activity.  Recent movements in the 10 Year Treasuries also point in the direction of continued slow growth. 

Suggestions

If you have any suggestions on future columns or research about specific industries or other economic data, please send me an email at udufrene@ius.edu.

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Uric Dufrene.

Uric Dufrene, Ph.D. holds the Sanders Chair in Business in theSchool of Business at Indiana University Southeast. He conducts research on local and regional economic trends, and teaches corporate finance at the undergraduate and graduate levels. He previously served as dean of the School of Business.