Last week's Initial Jobless Claims Report showed that 505,000 people filed for unemployment benefits, which was about what was expected, and represented a ten month low for the report. The Continuing Jobless Claims Report, which indicates the total number of people collecting unemployment benefits, fell by 39,000 to a total of 5.61 Million.
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Chart: Continuing Unemployment Claims
The media often spins this data as good news - but the labor market remains in exceptionally tough shape. The Continuing Claims number declining from a record high of 6.82M in June to last week's 5.61M is the result of only two potential things happening: People are finding jobs and no longer need unemployment benefits, or they have been unemployed for so long that their benefits are running out before they've been able to find a job. With a 10.2% Unemployment Rate looking like it will move higher still, it is most likely the latter. Another clear sign of a very troubled labor market was back on November 6th, when President Obama signed a bill that will extend unemployment benefits by an additional 20 weeks...there would be no reason to do this if jobs were being created.
In other news, October Retail Sales were weak overall, which is concerning for several reasons. One somewhat overlooked impact is that tax receipts from retail sales help both the individual states and the country as a whole. If the consumer doesn't spend - perhaps due to job loss or lower family income - and there are therefore less tax receipts from retailers, the government runs an ever-deeper budget deficit. The only way to get out of a deficit is to either raise other taxes or cut spending - and neither option is very popular. Many states are in poor fiscal shape because of soaring budgets and lower tax receipts.
There aren't any easy answers - but it's clear that the labor market needs to see some serious improvement for the economy to recover in a significant way.
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