Last Updated May 6, 2010 12:40 PM EDT
Productivity Growth A Mixed Blessing
The jobless claims number is consistent with a moderate 180,000 to 200,000 gain in payroll employment and a stable but unsustainably high unemployment rate of 9.7 percent. The key issue is that although productivity growth moderated in the first quarter, it's still at stunningly high levels and employment costs fell, which means profits are still going to be extremely good in the first quarter. And profit growth is one of our hopes for a self-feeding recovery.
That's the good news, but one of the reasons companies are generating profits is that they're not hiring a lot of people. So it's a bit of a double-edged sword. But we are starting to see those profits being poured back into investment, most notably in the tech sector and in new equipment which is going to show up in some manufacturing employment. This isn't going to generate large job gains and it still doesn't deal with the real problems going on in small businesses, which we look to be the real job engine, but it's a start.
What we don't know is that as continuing claims come down, is it because people have given up looking for jobs or because the labor market is improving? The improvement we've seen in the labor market so far isn't enough to pop champagne corks over, but one would hope that people have started to find jobs.
Top Grads Faring Better
We're at the point where the layoffs and the blood-letting have stopped and we're beginning to generate a few jobs. I've talked anecdotally to people at several graduate schools, and their grads are getting more jobs this year than last year. That's good news but it's from the absolute top institutions and it's graduate schools, not undergraduates. So the job market for the most educated people is better than it is for the overall economy, but it's still difficult for pretty much everyone.
The European situation has put a bit of a dimmer on the overall picture, but I think officials there have finally woken up and are dealing with their own problems. Despite their disdain for bailouts, they're bailing out Greece. Because at the end of the day they don't want to give up all the work they've put into creating the Euro zone. For us in the U.S., the biggest risk was containing the panic, and it looks like they're finally moving in that direction, although we're not quite there yet. More broadly, we trade with Europe, but frankly the slow down in Europe as a result of this is not going to make or break our recovery.
Diane Swonk, chief economist at Mesirow Financial, talks to CBS MoneyWatch twice a week about the day's top economic news and developments. Her responses are edited for clarity and length.