Unemployment: Improvement?

Is there light at the end of the tunnel?

Possibly. Today’s release of last week’s data on new claims for unemployment assistance shows a glimmer of hope, with claims dropping quite sharply to 435,000. That’s a decline of 24,000. The good news is that this drop brings the four week moving average down to 446,500, its lowest point in two years.

Before we get carried away we should all recall that the economy needs to generate a far greater number of jobs than last month’s 150,000 to break the back of unemployment. Plus the prospect of long term unemployment benefits running out for approximately 5 million people casts a considerable pall over consumer’s moods as we head into our prime retail selling season.

With the recent election producing a hung Congress there is extra pressure on the lame duck session to tackle issues like the extension of those benefits and those Bush tax increases scheduled for the new year. That adds up to some fraught and crucial decision making between now and year end. Without clarity on those issues we will enter the new year in an even more muddle condition than our current mess.

But at least unemployment seems to have reached its high water mark. How quickly it recedes depends as ever on whether the economy can get beyond its current 2.0% to 2.5% growth range. As of now the most likely GDP growth for the fourth quarter is stuck within that range. Which is, frankly, not enough to create much movement on jobs.