New unemployment claims continue to fall

Stephen Emerson would like to hire a recruiter or two for his South Jersey staffing company. True, that's only two jobs in the face of the deepest unemployment since the 1980s, but it's significant.

When recruiters are fired, it means the labor market is on the downturn. And when they are being brought back, hiring is on the horizon - even if the horizon is a distant one.

Yesterday, the U.S. Department of Labor reported that 434,000 initial claims for unemployment benefits were filed in the latest week, down from a horrifying 674,000 claims filed in the week ended March 28, the worst week since the start of the recession in December 2007.

And this morning, the department is to release its much-watched monthly employment report. Economists have been hopping back and forth in predicting whether the report for December will show the economy was able to pack enough punch to reverse 23 continuous months of job losses and create employment for even some of the 15.4 million people who are out of work.

In November, employers shed 11,000 jobs, the smallest monthly loss in that span.

Even though economists predict that the nation's unemployment rate will rise to as high as 11 percent this year from November's 10.0 percent, Emerson sees positive signs from his vantage point as the chief executive officer of the Emerson Personnel Group Inc., a Cherry Hill staffing agency.

"Our clients are calling for a lot of temporary administrative employees," he said. "That tells us that things are going to be improving for everyone in three to four months."

But even a positive government report today will not look anything like prosperity: Economists are predicting it will show between 25,000 jobs added in December and 25,000 jobs lost. A healthy labor market requires 100,000 new jobs every month to keep up with population growth.

Either way, the numbers will be less significant economically and statistically than they will be politically.

"It might not be a really important difference for economists if they go down a smidge or up a smidge," said Christopher Borick, director of the Institute of Public Opinion at Muhlenberg College in Allentown.

"But for political figures who are trying to show signs of recovery and to build a case that the economy is headed in the right direction, the psychological difference is significant."

On the one hand, Democrats need an improving job situation heading into midterm elections. On the other hand, "for people or groups that are seeking to extend [unemployment] benefits because of the ongoing economic difficulties, positive numbers cloud their case," Borick said.

Despite some positive signs, there would have to be a whopping number of new jobs for the employment situation to change materially, economists say.

Here's why:

The number of people in the labor force - people who are either working or who have looked for work in the last month - is going down. Not only are there fewer people employed, but there are fewer people trying to be employed.

College students are choosing graduate school instead of entering the job market. Mothers are staying home with their babies. Some of the laid-off are too discouraged to keep looking.

Therefore, the "participation rate" - the percentage of the working-age population in the labor force - is down.

It would take 2.7 million jobs simply to bring the participation rate back to prerecession levels, estimated Heidi Shierholz with the Economic Policy Institute, a Washington research group.

Economists agree 100,000 jobs a month are needed to keep pace with the population.

"When those people start coming back, we're going to need far more than 100,000 a month. We may need twice that to keep the unemployment rate from rising," she said. "Even if we start adding 50,000 or 70,000, the unemployment rate will continue to kick up.

"Unemployment is going to look worse before it gets better."

That is why economists such as Mark Zandi, of Moody's Economy.com in West Chester, see the unemployment rate rising to as high as 11 percent.

With the average length of unemployment now at 28 weeks, many of those who return to the job market will not quickly find work. The result: They will push up the proportion of unemployed in the workforce.

Also, the economy barely recovered from the last downturn - and that may offer a window into what will happen as the 2008-09 recession ends.

In March 2000, a year before the 2001 recession, jobless claims were in the high 200,000s. By the time the recession started in March 2001, initial claims had topped 400,000, rising as high as 517,000 two weeks after the Sept. 11 terrorist attacks.

When that recession ended in November 2001, the unemployment rate was 5.5 percent, up from 4.3 percent at the start, a modest increase.

But the unemployment rate continued to climb, topping out at 6.3 percent in June 2003, a full 19 months after the official end of the recession.

Meanwhile, the number of initial jobless claims stayed in the upper 300,000s and lower 400,000s for years. Only in January 2006, when the unemployment rate dropped to 4.7 percent did new jobless claims fall below 300,000.

By the start of this recession in December 2007, initial claims were close to 350,000 a month and unemployment was 4.9 percent.