First-Time Jobless Claims Drop Slightly

The number of newly laid-off workers requesting jobless benefits fell slightly last week for the third straight time. But initial claims remain above levels that would signal net job gains.

New claims for unemployment insurance fell 5,000 to a seasonally adjusted 457,000, the Labor Department said Thursday. That nearly matched analysts' estimates of 455,000, according to Thomson Reuters.

The four-week average of jobless claims, which smooths out volatility, dropped to 471,250. Still, the average has risen by 30,000 since the start of this year. That's raised concerns among economists that persistent unemployment could weaken the recovery.

The average number of weekly jobless claims remains above the 400,000-to-425,000 level that many economists say it must fall below before widespread new hiring is likely. Initial jobless claims are considered a gauge of the pace of layoffs and an indication of companies' willingness to hire. High unemployment has persisted even though the economy grew in the second half of last year.

In a separate report, the department said consumer prices were flat in February. A rise in food prices was offset by a drop in gasoline and other energy costs. Excluding the volatile food and energy categories, the core Consumer Price Index edged up just 0.1 percent last month, matching economists' estimates.

The report adds to evidence that the weak economy has all but erased inflation. That allows the Federal Reserve to continue its efforts to revive the economy by keeping the short-term interest rate it controls at a record low near zero.

Also, the current account trade deficit widened in the fourth quarter, the Commerce Department said, reflecting an improving economy. Imports of oil, autos and other products outpaced gains in U.S. exports. But the trade gap for all of 2009 fell to its lowest point in eight years.

Economists say they think the deficit will widen during 2010, though not to the record heights seen before the recession. A weaker dollar is expected to boost U.S. exports. A weaker dollar makes U.S. goods cheaper overseas and foreign goods costlier for U.S. consumers.

The current account is the broadest gauge of trade because it includes not only trade in goods and services but also investment flows between countries. It measures how much the country must borrow from foreigners.

In the Labor Department report, the number of people continuing to claim unemployment benefits rose slightly to 4.58 million. That was similar to what economists expected. But it doesn't include millions of people who are receiving extended benefits for up to 73 extra weeks, on top of the 26 weeks customarily provided by the states.

More than 6 million people were on the extended benefit rolls for the week that ended Feb. 27, the latest data available. That is about 300,000 more than in the previous week. The total number of people receiving benefits now tops 11.2 million.

Over the past two months, "this measure has gone nowhere but up," Dan Greenhaus, chief economic strategist at Miller Tabak, wrote in a note to clients. "We believe it will moderate through the spring, but the larger story, that people are simply not finding jobs, remains in place."

The nation's gross domestic product, the broadest measure of output, rose 5.9 percent in the fourth quarter, the fastest pace in six years. But much of that growth reflected a one-time gain from companies restocking their inventories. Many economists expect the growth rate to drop to about 3 percent in the current January-to-March quarter.

The unemployment rate was 9.7 percent in February, the same as the previous month, down from a peak of 10.1 percent last October. Still, the Federal Reserve and most private economists expect it to remain well above 9 percent throughout this year.

The Fed said Tuesday that "the labor market is stabilizing." That's an improvement from its previous diagnosis in January, when it said its deterioration "is abating."

Among states, North Carolina had the largest increase in claims, with 5,100. It attributed the increase to layoffs in the construction, apparel and industrial machinery industries.

Illinois, Oregon, Ohio and Alabama had the next-largest increases. The state data lags one week behind the initial claims figures.

New York had the largest drop in claims, with 10,929. It cited fewer layoffs in transportation and services. California, Connecticut, Kentucky and West Virginia also reported declines.

US Dept. of Labor; Thomson Reuters; Miller Tabak.

Job Openings Up Sharply In January

Job openings rose sharply earlier this year, evidence that employers are slowly ramping up hiring.

The number of openings in January rose about 7.6 percent, to 2.7 million, compared with December, the Labor Department said. That's the highest total since February 2009.

Hiring is critical to sustaining the economic recovery because job growth boosts incomes and helps restore the confidence needed to drive consumer spending.

There are now about 5.5 unemployed people, on average, competing for each opening. That's still far more than the 1.7 people who were competing for each opening when the recession began. But it's down from just over 6 people per opening in December 2009.

Economists were encouraged by the report but cautioned that hiring will likely increase only gradually this year.

"It's getting better, though not as quickly as you'd like," said Dan Greenhaus, chief economic strategist at Miller Tabak.

The economy has lost 8.4 million jobs since the recession began, the largest drop since the 1930s. The jobless rate was unchanged last month at 9.7 percent. Most economists expect the rate to remain elevated for several years.

Still, Greenhaus and other economists predict the economy will gain 200,000 to 300,000 jobs in March. That compares with the loss of 36,000 jobs that the government reported for February, though some of the reported losses last month were due to severe snowstorms.

Up to 100,000 of the net job gains expected for March will be due to government hiring for the Census, Greenhaus said.

The transition to job growth "is an important step in the expansion," Nigel Gault, chief U.S. economist at IHS Global Insight, wrote in a note to clients. "It will not change the story that this will be a subdued recovery ... but will reduce the odds of a relapse."

The gradually brightening jobs picture corresponds to what many job search Web sites are reporting. The Monster employment index, a measure of online postings by the job board Monster.com, rose 2 percent in February compared with the previous year. That was the first year-over-year increase since December 2007, when the recession began, the company said.

Indeed.com, which aggregates job listings from thousands of online career boards and individual company sites, is also seeing improvement. The company said last week that 10 of the 12 industries it tracks posted more job openings in February than they did a year ago.

"We have seen a sharp turnaround in the job market in the last few months," said Paul Forster, CEO of Indeed.com.

The Labor Department's Job Openings and Labor Turnover Survey illustrates the heavy job turnover that occurs even in a sluggish economy. Employers hired about 4.08 million people in January, the report said. At the same time, 4.12 million people were fired or otherwise left their jobs.

US Dept of Labor; Miller Tabak; IHS Global Insight; Indeed.com; Monster.com; AP

Senate To Take Up Unemployment Extension Today

Legislation extending unemployment insurance for the long-term jobless faces a key test vote in the Senate, its momentum helped by about 60 popular tax breaks for individuals and businesses that expired at the end of last year.

The measure also prevents doctors from absorbing a crippling cut in Medicare payments, extends health insurance subsidies for the unemployed and gives cash-starved states help with Medicaid, the federal-state program providing health care to the poor and disabled.

The unemployment insurance alone - to provide weekly unemployment checks averaging above $300 to people whose core 26-week benefit package has run out - will cost $66 billion through December. In some states people are eligible to receive benefits for up to 99 weeks.

The bill, and the test vote today, demonstrate the difficulty Democrats face as they focus on jobs. It doesn't include new ideas for boosting jobs, but instead reprises elements of last year's $862 billion economic stimulus bill, which is earning mixed reviews from voters. Simply extending those provisions has produced a far more expensive measure than a separate so-called jobs bill that Democrats hope to soon send to President Barack Obama. That measure would boost highway spending and give tax breaks to companies that hire the unemployed and could clear the Senate for Obama's desk this week.

At a gross cost of about $148 billion, Tuesday's measure illustrates the extraordinary cost of the unemployment safety net as the economy inches out of the recession. Democrats say the unemployment benefits inject demand into the economy and say renewing the tax cuts helps preserve existing jobs.

The measure closes $29 billion of tax loopholes to help defray its cost, including one enjoyed by paper companies that get a credit from burning "black liquor," a pulp-making byproduct, as if it were an alternative fuel.

All told, the measure would add $107 billion to the deficit over the coming decade. Democrats have labeled most of the bill an emergency measure, exempting it from stricter budget rules enacted just last month.

Democrats need to muster at least one Republican vote Tuesday to reach the 60-vote threshold needed to limit debate and guarantee an up-or-down vote. But Sen. Susan Collins, R-Maine, provided crucial help last week to keep the measure out of another procedural tangle, and Democrats sound confident they will prevail.

The bill includes about 60 popular tax breaks for individuals and businesses that expired at the end of 2009. The bill would extend the tax breaks through 2010, at a cost of about $26 billion.

Congress routinely extends the tax breaks each year with large bipartisan majorities. Businesses and tax planners would prefer a more permanent solution, but lawmakers can't agree on how to pay for a longer extension.

The tax breaks include a property tax deduction for people who don't itemize, lucrative credits that help businesses finance research and development and a sales tax deduction that mainly helps people in the nine states without income taxes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming.

There is a deduction for college tuition for couples making less than $160,000 a year, and one for teachers who use their own money to buy school supplies. There is a tax credit for community development agencies that invest in low-income neighborhoods, as well as a tax break for restaurant owners and retailers who remodel their stores.

The expiration of one tax break, a $1 per gallon credit for the production of biodiesel, has already caused "a pretty substantial blow to the industry," said Michael Frohlich, a spokesman for the National Biodiesel Board. The credit would cost $1 billion to extend for the rest of the year.

Unemployment Rate Unchanged As 36K Jobs Lost

The unemployment rate held at 9.7 percent in February as employers shed fewer jobs than expected, evidence that the job market may be slowly healing.

The Labor Department said employers cut 36,000 jobs, below analysts' expectations of 50,000. Analysts expected the jobless rate to rise to 9.8 percent.

The severe snowstorms that hammered the East Coast last month may have affected job losses, the department said, but it wouldn't quantify the impact. Other data in the report signaled the storms didn't have as much impact as feared.

Economists estimated before the report that the storms could inflate job losses by 100,000 or more. That would mean the economy generated a net gain in jobs last month, excluding the impact of the snow, for only the second time since the recession began in December 2007.

The department revised its estimate of job losses for January from 20,000 to 26,000, but said job cuts were fewer in December than originally estimated - 109,000 rather than 150,000. Hiring for the 2010 Census accounted for 15,000 jobs, the department said. The government anticipates hiring 1 million temporary census workers this year.

Many economists anticipated that the snowstorms would artificially inflate job losses because the snowstorms occurred in the same week that the government surveys businesses about their payrolls. Employees who couldn't make it to work and weren't paid aren't included on those payrolls.

But many industries that economists thought might be hardest hit -- construction, retail, and hotels and restaurants - didn't seem to be heavily affected. The construction industry lost 64,000 jobs, compared to an average of about 40,000 in the previous three months. Retail employment was flat and the leisure and hospitality industry posted a net gain of 7,000 jobs, the first increase since September.

The unemployment rate, which hasn't risen since October, could be bottoming out. Still, 14.9 million Americans are unemployed, nearly double the total when the recession began, and the economy has shed 8.4 million jobs during that time.

The economy grew at a 5.9 percent rate in the October-December quarter last year, the fastest pace in six years. But most economists expect the pace of growth to slow to about 3 percent in the current quarter, which won't be fast enough to quickly bring down the jobless rate.

US Dept of Labor;AP

Longer Unemployment Benefits Causing Longer Unemployment

Anyone ticking off the reasons long-term joblessness stands at its highest levels in decades needs to do a little arithmetic.

As of mid-2008, unemployment benefits ran out after 26 weeks. Under two presidential administrations and a more-than-willing Congress, however, they kept growing and growing. First, they expanded by 20 weeks, then another 13, then 20 more and then 13 more. One additional week got added to the first 13 to make 14. Finally, another six got tacked on.

Add it up, and that's 99 weeks of unemployment benefits available to residents who qualify - many states have different rules, but may also run to 99 weeks at the maximum.

Given the rotten economy, it's easy to imagine why politicians keep pumping quarters into the jukebox. It takes time to get a job, so the long duration of benefits is not a sign of deliberate malingering. But those government checks come with an unwanted side effect, especially for workers at the low end of the economic food chain.

They go a long way toward explaining why 40 percent of jobless Americans have been out of work for at least 27 weeks, the highest level since the government started keeping score in the 1940s.

"Those programs subsidize unemployment," explained Robert Shimer, economics professor at the University of Chicago. "There could be good reasons to do it, but we should be clear on the cost. It has a pretty substantial impact."

He reckons that the current level of benefits probably accounts for 1 to 1.5 percentage points of the 9.7 percent national unemployment rate.

Republican Sen. Jim Bunning of Kentucky became Capitol Hill's biggest grinch this week for single-handedly opposing another benefit renewal, before caving in Tuesday evening.

It certainly sounds like his heart's too small. After all, the typical check in many states averages only $315 a week, maxing out at $535 for a family with children, hardly megabucks. And economists understand that extended unemployment checks, to some small degree, can give the jobless more time to find a better position than they might otherwise settle for.

The reasons behind today's long-term unemployment rate obviously go way beyond benefit extensions. The depth of the recession is probably the biggest factor, and economic changes ranging from the advance of technology to the aging of the work force contribute as well.

The lack of credit has hampered small businesses that otherwise would have led the way with cautious hiring, some say. And unlike previous recessions, the housing market crash has made it especially difficult to move on.

When the unemployment checks finally stop, a reality check will arrive, said Shimer. The recovery will take root as people move to greener pastures, different occupations and in some cases, lower-paying jobs. As Shimer observed, "That's a very hard thing to do."

Unemployment Rate Drops To 9.7%

The unemployment rate dropped unexpectedly in January to 9.7 percent from 10 percent while employers shed 20,000 jobs.

The rate dropped because a survey of households found the number of employed Americans rose by 541,000, the Labor Department said. The job losses are calculated from a separate survey of employers.

The report also included an annual revision to the estimates of total payrolls, which showed there were 930,000 fewer jobs last March than previously estimated. The department also revised down its estimates for April through October of last year, adding another 433,000 job losses.

The November figure was revised higher, however, to show a gain of 64,000 jobs. All told, the Great Recession has eliminated 8.4 million jobs, the department said. That's the most of any recession since World War II as a proportion of total payrolls. Aside from November's gain, January's job losses were the smallest since the recession began. Employers cut 779,000 jobs in January 2009. The report included more good news from the manufacturing sector, which is a key factor in the recovery. Manufacturers gained 11,000 jobs, its largest increase since April 2006.

Retailers added 42,100 jobs, the most since November 2007, before the recession began. Temporary help services gained 52,000 jobs, the fourth month of gains in that category. That could signal future hiring, as employers usually hire temp workers before permanent ones.

The number of part-time workers who want full-time work, but can't find it fell by almost 1 million. That lowered the "underemployment" rate, which also includes discouraged workers, to 16.5 percent from 17.3 percent.

US Dept of Labor; The Wall Street Journal.

Unemployment Rises In Most Metro Areas

Unemployment rose in most cities and counties in December, signaling that companies remain reluctant to hire even as the economy recovers.

The unemployment rate rose in 306 of 372 metro areas, the Labor Department said Tuesday. The rate fell in 41 and was unchanged in 25. That's worse than November, when the rate fell in 170 areas, rose in only 154 and was unchanged in 48.

The metro employment numbers aren't seasonally adjusted and can be volatile. Many of the increases were due to seasonal factors.

For example, Ocean City, N.J., which bills itself as "America's Greatest Family Resort," saw its unemployment rate jump to 16.4 percent in December from 14.8 percent the previous month.

That's double the 8 percent it reported in July, even though the nation's economy was in worse shape then.

Ocean City is one of the 19 metro areas that reported unemployment rates of at least 15 percent. Twelve of those are in California and three are in Michigan, the department said.

Joblessness topped 10 percent in 138 metro areas, up from 125 in November but below last year's peak of 144 areas in June.

Improvement in the auto industry, meanwhile, saw unemployment rates drop in the metro areas around Detroit and Warren, Mich. Automakers and auto parts companies have recalled workers in recent months as they seek to replenish inventories depleted by the "Cash for Clunkers" program, which caused a jump in car sales in August.

The Detroit area saw unemployment fall to 15.7 percent from 16.4 percent, while the Warren area reported a drop to 14.3 percent from 14.8 percent. While still high, the rates are down about 2 percentage points from last fall.

Steve Cochrane, a regional economist at Moody's Economy.com, said it isn't clear if the gains are sustainable once the auto companies have rebuilt their inventories.

"There are no guarantees the unemployment rates won't go up again," he said.

The U.S. economy benefited heavily in the fourth quarter from inventory changes. Companies ramped up production and reduced inventories less in the October to December period, which accounted for about two-thirds of the 5.7 percent growth in the economy during that period.

Nationwide, the unemployment rate was 10 percent in December, unchanged from the previous month, as employers shed 85,000 jobs. The Labor Department will report January figures on Friday, and economists expect a gain of 5,000 jobs and a slight increase in the unemployment rate to 10.1 percent.

In the past year, unemployment rose in almost all of the 372 metro areas tracked by the report, except one: Troubled Elkhart, Ind., saw its jobless rate fall to 14.8 percent in December 2009 from 16 percent a year earlier.

Unemployment in Elkhart and the surrounding region in northern Indiana soared during the recession after many recreational vehicle manufacturers laid off workers and in some cases closed their doors. President Obama visited Elkhart twice last year.

Recently, the area has attracted several electric car manufacturers, including Think North America, a subsidiary of Norwegian-based Think Global. The company plans to sell electric cars in the United States later this year.

Think North America said last month it will open a factory in Elkhart in a former RV plant, potentially creating 415 full-time jobs by 2013.

The lowest unemployment rates are in the upper plains states, with Fargo, N.D. reporting the nation's lowest rate, at 4 percent, followed by Grand Forks, N.D., and Lincoln, Neb., at 4.1 percent each.

The highest rate is in El Centro, Calif., with 27.7 percent, followed by Merced, Calif., at 19.8 percent. El Centro is heavily agricultural and has many seasonal farm workers that are frequently unemployed. Its jobless rate is down from 33.1 percent in August.

The Labor Dept.; Economy.com; AP

Formula Shows Why It's Hard To Cut Jobless Rate

The economy's 5.7 percent growth last quarter - the fastest pace since 2003 - was a step toward shrinking the nation's 10 percent unemployment rate.

There's just one problem: Growth would have to equal 5 percent for all of 2010 just to lower the average jobless rate for the year by 1 percentage point.

And economists don't think that's possible.

Most analysts say economic activity will slow to 2.5 percent or 3 percent growth for the current quarter as the benefits fade from government stimulus efforts and from companies drawing down less of their stockpiles.

That's why the Federal Reserve and outside economists think it will take until around the middle of the decade to lower the double-digit jobless rate to a more normal 5 or 6 percent.

Another way of looking at it: A net total of about 3 million jobs would have to be created this year to lower the average unemployment rate by 1 percentage point for 2010, economists estimate. Yet even optimists think the creation of 1 million net jobs is probably out of reach this year.

High unemployment poses a risk to the unfolding recovery because it leads consumers to spend less, keeping economic growth weak. A sharp pullback in spending might even push the economy back into recession. Joblessness also represents a danger for President Barack Obama's Democratic Party in this fall's congressional elections.

The National Association for Business Economics and the International Monetary Fund think gross domestic product will rise just under 3 percent for all of this year. GDP, the best gauge of economic activity, measures the value of all goods and services produced in the United States.

To get a sense of just how deep a dent the worst recession since the 1930s has made in the economy, consider this: The economy shrank 2.4 percent for all of 2009 -- the sharpest drop since 1946. It was also the first annual decline since 1991.

Mark Zandi, chief economist at Economy.com, and Bill Cheney, chief economist at John Hancock, agree that the economy would have to grow roughly 5 percent for all of 2010 just to ratchet down the average unemployment rate for the year by 1 percentage point -- to a still-high 9 percent.

Their math is based on Okun's law, named for economist Arthur Okun. In 1962, Okun produced a formula for the connection he saw between unemployment and economic activity.

Exactly how much GDP growth is needed to lower the unemployment rate for a given period varies. That's because the formula involves several factors besides GDP growth. It also considers, for example, businesses' productivity growth.

When the economy was recovering from the 2001 recession, it took two years to reduce the unemployment rate by nearly a full percentage point: It fell from 6 percent in 2003 to 5.1 percent in 2005. GDP growth averaged just over 3 percent.

Economists say the formula hasn't always held up perfectly in recent decades. Rather, it's relied upon as a rough rule of thumb for determining how much growth will be needed to lower unemployment.

But a near-textbook case occurred in 1976, when the economy expanded at a 5.4 percent pace. As Okun would have predicted, that growth drove down the unemployment rate by nearly a full percentage point: from 8.5 percent in 1975 to 7.7 percent

From information supplied by Economy.com, The Dept of Labor, Harvard University and National Association for Business Economics and the International Monetary Fund