Smith Faculty Opinion Article
May 6, 2009
Thursday’s Unemployment Claims Report
Thursday, the Labor Department will report initial unemployment insurance
claims for the week ending May 2. This hard data on labor market conditions is
the most current official indicator of the state of the economy.
In recent weeks, jobless claims have eased off record levels, but these still
linger alarming high. For the week ending April 25, jobless claims stood at
631,000, and for a healthy economy this figure should be well below 400,000.
Economists expect claims to remain steady at about 630,000 for the week
ending May 2. I expect those to be a bit less and to cycle down further in the
weeks ahead. However, they will remain at unacceptably high levels, and the
unemployment rate will continue to rise.
Released Wednesday, the Challenger survey of layoff plans for businesses and
governments indicate improvement in April, as did the ADP advance estimate of
private sector employment losses. However, the Challenger survey is of a more
limited sample than Labor Department jobless claims, and the ADP survey is an
erratic indicator of the official Labor Department jobs numbers due out Friday.
Economists are expecting another tough month for April—about 630,000 jobs
lost, down from 663,000 in March. My forecast is the same.
First quarter GDP data indicated a lift in consumer spending but that largely
reflected gains in January. Consumers spending and retail sales for February and
March, as reported by the Commerce Department, were not as encouraging, but some
analysts point to inconsistencies with industry data. They expect the Commerce
Department to revise upward its March estimates.
If retail sales and consumer spending are indeed strengthening, April retail
jobs figures should show a gain and point to recovery. Retail trade has shed
697,000 jobs since November 2007, and lost
51,000 and 48,000 jobs in February
Again look for a jump in retail employment if the recession is ending, but my
soundings indicate don’t hold your breathe.
The economy will turn up by the end of the year but many dangers lurk beneath
President Obama may not get his “quick rinse” bankruptcy for Chrysler, as the
judge may be inclined to uphold the legal rights of the company’s smaller
creditors. Giving away the company to the UAW was a political decision not well
grounded in the law.
Residential and commercial foreclosures will accelerate through the summer,
further stressing banks. And much of the improvement in credit markets as been
due to Federal Reserve largess toward the big banks and hedge funds—true
rebuilding of healthy credit markets is a long way off.
What recovery we get will be tepid, and unemployment will continue to rise
until it pierces 10 percent.
Peter Morici is a professor at the University
of Maryland School of Business and former Chief Economist at the U.S. International