Last Updated Aug 19, 2010 12:58 PM EDT
There's no real way to paint that as good news, but it makes sense to put it in context. Here are some things to think about while looking at those gloomy employment numbers:
- It's August. Who doesn't feel tapped out? The dog days of summer often are the worst days in employment statistics, too. That 500,000 figure is seasonally adjusted, and that means that it is actually adjusted upward by the Labor Department's expectation that more people typically have work during that week of summer. (Think resort and construction workers, for example.) In actual numbers, initial claims for unemployment insurance actually fell 22,650 to 401,856 in the week ending Aug. 14, the Labor Department reported.
- It's better than it was. A year and a half ago, some 651,000 people were filing for new benefits every week, seasonally adjusted. The chart above shows clear recovery from 2009's grim first quarter. But it also shows a flattening of momentum right now. It may not be a full-fledged double dip, but the recovery is at least resting. Or stalling. Time will tell.
- Earnings may be suspect. All of those companies currently reporting better-than-expected results for the second quarter? Maybe they got there by dumping more workers, instead of by bolstering sales. And sooner or later, the loss of a workforce will affect a company's ability to make and sell products and services and thus, make more money. If you choose your investment targets by profitability, make sure you read the full report and pay attention to how they are producing those profits. If profits growth is exceeding sales growth, that's not good.
- Watch for some good holiday sales. The jobless claims number is particularly terrifying to retailers, who are already stocking their Christmas-season inventories. If they were betting on a better employment picture, they may have ordered too much stuff for shoppers who are too worried to spend money. Think about your job before you go crazy, but don't be surprised to see some early gifts in the form of deep discounts.