Applications for unemployment benefits fell more than forecast last week — to the lowest level since July 2008. This suggests that labor markets are beginning to heal.
Stock market futures rallied on the news.
Ian Sheperdson of High Frequency Economics notes an intriguing rule of thumb: Each 10,000 drop in Weekly Jobless Claims sustained for a month is consistent with payroll growth rising by 25,000.
“Jobless claims declined by 34,000 to 407,000 in the week ended Nov. 20, Labor Department figures showed today in Washington. The median projection of economists surveyed by Bloomberg News called for a drop to 435,000. The total number of people receiving unemployment insurance decreased to the lowest in two years, and those on extended payments also fell.
Fewer firings lay the groundwork for a pickup in job creation that will generate incomes and spur consumer spending, which accounts for 70 percent of the economy. Even with companies firing fewer workers, unemployment will be slow to decline, according to the Federal Reserve’s latest forecast in which policy makers also lowered their growth projections.”
I do not believe “consumer spending” still accounts for 70% of the economy — its slipped a number of basis points.
Whether being such a consumerist, debt-laden society is good for our long term happiness and well being is another discussion entirely . . .
U.S. Jobless Claims Decline to Lowest Since July 2008
Bloomberg, Nov. 24 2010