Initial claims drops again; U.S. stays on modest growth path for now

12/15/2011 2:16 pm EST


Jim Jubak

Founder and Editor,

The U.S. economy continues to demonstrate remarkable strength. That isn’t to say this isn’t a sub-par recovery or that growth in 2012 won’t slow as Europe’s economies slide toward recession. But given the seemingly endless flow of bad news from elsewhere even modest growth is remarkable.

Today the U.S. Department of Labor announced that initial claims for unemployment fell to 366,000 for the week ended December 10. That was a significant drop from 385,000 in the week ended December 3 and was the lowest initial claims number since May 2008. The four-week moving average, which takes out weekly volatility, fell to 388,000, the lowest level since July 2008.

Economists, demonstrating that they can get as depressed as anyone by negative news flow, had forecast that initial claims would climb slightly for the week to 390,000, according to

The Department of Labor had warned after initial claims dropped in 385,000 for the week ended December 3 that the figures might be subject to difficulties in correcting for the effects of the Thanksgiving holiday. This week the numbers don’t have that problem. This seems to be an accurate reflection of what is, at least, a temporary swing in employment.

Let’s put this in context.

This is the second week with initial claims below 400,000. At 400,000 initial claims the economy is holding about steady on jobs with the number of new hires in rough balance with the number of new layoffs.

A drop to 385,000 or 366,000 indicates that the economy is probably adding jobs—but at a very slow rate. Even in times of what economists call full employment initial claims run at something like a 300,000 weekly rate. (Calculating full employment is a contentious issue in economics. The current consensus among mainstream economists seems to be that in U.S. economy as currently structured full employment means a 6% unemployment rate.)

This morning’s positive employment picture got a boost from two regional reports from the Federal Reserve banks. The Federal Reserve Bank of New York announced that its general economic index for the New York region climbed to 9.5 in December from 0.6 in November. (Ratings above zero indicate expansion.) A similar index from the Federal Reserve Bank of Philadelphia showed an increase to 10.3 in December from 3.6 in November.

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