Bushonomics: Jobless claims remain elevated due to weak economy

Unemployed, 1934

Watercolor and ink on paper

30 October 2008
By CHRISTOPHER S. RUGABER

WASHINGTON – New claims for unemployment benefits were unchanged last week, remaining at the same elevated level due to the struggling economy, the government said Thursday.

The Labor Department said new claims for jobless benefits for the week ending Oct. 25 stood at a seasonally adjusted 479,000, the same as the previous week and above analysts' estimates of 475,000.

The four-week average, which smooths out fluctuations, was 475,500, down 5,000 from the previous week's total.

The number of people continuing to claim unemployment benefits also improved, falling 12,000 to 3.72 million.

Separately, the Commerce Department said Thursday that the nation's economy shrank by 0.3 percent in the third quarter, an indication the country may already be in recession.

Many economists expect the economy to continue to shrink in the fourth quarter and first quarter of next year, meeting one definition of a recession as at least two consecutive quarters of decline.

Consumer spending plummeted by 3.1 percent in the July to September quarter, the Commerce Department said, the sharpest drop in 28 years.

Jobless claims above 400,000 are considered a sign of a recessionary economy. A year ago, claims stood at 332,000, the department said.

Job losses can ripple throughout the economy by causing consumers to cut back on their spending, and can also make it harder for individuals to make their mortgage payments, fueling the ongoing housing crisis.

Four weeks ago, the impact of the economic slowdown as well as Hurricanes Ike and Gustav sent jobless claims to a seven-year high of 499,000. The department attributed about 45,000 of the claims at that time to the impact of the hurricanes.

Hurricane Ike added only about 7,500 claims in Texas last week, the Labor Department said, which means claims have remained high even as the impact of the hurricanes has faded.

Companies cut 760,000 jobs in the first nine months of this year, sending the unemployment rate to 6.1 percent in September. Many economists expect the rate to increase to 8 percent or higher by next year.

Several companies have announced mass layoffs recently, including Whirlpool Corp., financial services company National City Corp. and Xerox Corp.

Commentary:

What apparently are not being necessarily counted here is that unemployed that ran out of unemployment extensions, because of the inability to find work and are dropped from the count of legitimate unemployed; which this is more assured, with continuous layoffs and business failures still on the rise.

What the bottom line is, these no longer countered unemployed; fell into the poverty crack and became forgotten.

As for ‘consumers to cut back on their spending,’ this has became a water trickle to even what it was a month ago. What may have been long lines at the checkout line is now in many places, more like a ghost town.

As in the Great Depression, with then US President Franklin Delano Roosevelt telling American’s that “Prosperity is just around the corner;” with the majority of the American people living from day to day in utter desperation and poverty.