Initial Claims for Unemployment Insurance Fall Slightly
This week's release of data on Initial Claims for Unemployment Insurance shows a small decline relative to the previous week. Claims fell by 7,000, and the four week average fell by 4,750:
In the week ending May 1, the advance figure for seasonally adjusted initial claims was 444,000, a decrease of 7,000 from the previous week's revised figure of 451,000. The 4-week moving average was 458,500, a decrease of 4,750 from the previous week's revised average of 463,250.
As I've noted before in discussing this series, a decrease is better than an increase, but the rate of decline is very slow and, overall, we haven't made any progress since December when the numbers were similar. At this rate, it will take a considerable amount of time for the labor market to return to normal.
There are, I think, two ways to read these data. One is that we are making progress and the recovery of labor markets is well underway. In fact, a quick spike upward may be just around the corner. All we need to do is to be patient for a little while longer. The other view is that we really haven't made much progress over the last six months, unemployment claims are stuck at a high level, the unemployment rate remains elevated, and hiring is still sluggish. If nothing is done to help, labor markets will continue to have trouble for a considerable time period.
The first view allows policymakers to point to past government interventions and the wonders of the market as the cause of the turnaround, to pat themselves on the back for their efforts, and do nothing. The other view requires policymakers to acknowledge that their efforts so far have been insufficient, to promise to try to do more, and to dig in for the tough political battle on providing more help. It's been difficult to simply maintain the help that labor markets are getting, e.g. extensions of unemployment insurance are far from automatic, so it would be a tough battle and one that those initiating the battle could lose. Thus, although the benefits to unemployed workers and the economy more generally from giving more help to labor markets could be large, the political costs could be high as well.
Guess which story policymakers are likely to tell?
