Fewer people join ranks of jobless
Far fewer people are applying for unemployment benefits as the year ends, raising hopes for a healthier job market in 2011.
Applications are at their lowest level since July 2008, the Labor Department says. They fell to 388,000 in the week ending Dec. 25, bringing the four-week average to 414,000. Until mid- October, the four-week average had been stuck above 450,000 most of the year.
Economists say the number of people applying for unemployment benefits predicts where the job market will go over the next few months — so much so that they use these data to help forecast economic growth.
“We’re starting to see a pickup in job growth,” says Conference Board economist Kenneth Goldstein. “We may even get to a point, conceivably by spring, where the consumer is going to say that it no longer feels like we’re still in a recession.” He expects the economy to generate 100,000 to 150,000 jobs a month by spring, up from an average 86,500 a month in 2010.
That’s an improvement but still not enough to cause a big drop in the unemployment rate.
To Paul Kasriel, chief economist at Northern Trust, fewer people applying for unemployment benefits suggests the unemployment rate will slip from 9.8 percent in November to 9.7 percent early next year; that would mean about 150,000 fewer unemployed.
The Conference Board’s Goldstein says the unemployment rate actually might rise for a few months as an increase in job openings lures even more job seekers back into the labor market.
He doesn’t expect the unemployment rate to start dropping until mid-2011 and says it will finish the year above 9 percent.
The good news is that layoffs have fallen back to pre-recession levels. In October, 1.7 million people were laid off or fired — the lowest figure since August 2006, more than a year before the Great Recession started. Layoffs and dismissals peaked at 2.6 million in January 2009.
“We’ve stopped the losses, and things are kind of turning around,” says Mark Christiansen, deputy director of the Workforce Development Center in Riverside, Calif., which has one of the nation’s highest unemployment rates.
In past downturns, the economy didn’t start generating jobs until applications for unemployment benefits consistently fell below 400,000 a week.
But some economists say the old rule of thumb is outdated. Payrolls already were growing this year when applications were still well above 450,000 a week .