7.4% unadjusted GDP surge accompanied by plunge in Unemployment figures

[JohnT]

Jobless claims plunge

New claims for unemployment benefits fall to lowest level since January 2001, trouncing forecasts.

November 6, 2003: 8:39 AM EST

NEW YORK (CNN/Money) - Jobless claims plunged in the United States last week to their lowest level since January 2001, the government said Thursday, as the labor market continued its recovery from a long slump.

The Labor Department said 348,000 people filed new claims for unemployment benefits in the week ended Nov. 1, compared with a revised reading of 391,000 in the prior week.

It was the lowest number of weekly jobless claims since 339,000 in the week of Jan. 20, 2001. Economists, on average, expected 380,000 new claims, according to Briefing.com.

U.S. stock market futures were little changed after the report, pointing to a slightly negative opening on Wall Street. Treasury bond prices fell.

New claims had fluctuated in a narrow range near the 400,000 mark since mid-July. Most economists consider new claims below the 400,000 threshold as a sign of a recovery. Last week was the fifth consecutive week of jobless claims below that level and perhaps the clearest sign yet that the labor recovery is on the mend.

The four-week moving average of new claims, which irons out the volatility of the weekly data, fell to 380,000 in the week ended Nov. 1 from a revised 390,000 in the prior week.

Continued claims, the number of people out of work for a week or more, dipped to 3.51 million for the week ended Oct. 25, the latest data available, from a revised 3.53 million the prior week.

On Friday, the Labor Department reports on October's unemployment rate and the growth of non-farm payrolls. Economists, on average, expect unemployment to remain at 6.1 percent and for 65,000 new jobs to be added to payrolls, according to Briefing.com.

[Sava]

So 300k people losing their jobs is good news?

Just a suggestion, but if you want to be optimistic about the economy, don't start talking jobs until we see positive growth.

As Al Sharpton said, "How can we talk about recovery until the people who need to be recovered have recovered?"

[JohnT]

No, it's a mere rebuttal to those (like you) who said that there was no positive news in the labor market in the GDP thread.

[Sava]

Originally posted by JohnT
No, it's a mere rebuttal to those (like you) who said that there was no positive news in the labor market in the GDP thread.

I never posted in that thread.

[Dinner]

John: How many of those are people who found jobs and how many are people who's benifet's ran out? NPR was saying many people have run out of benifets and many of those who have found jobs are making considerabely less then before.

Still, it's nice that there are fewer new claims being made. That means fewer people are losing their jobs. But we still have a high unemployment rate and a high underemployment rate compared to the late 1990's.

[JohnT]

Unfortunately the www.bls.gov site has yet to update the Employment Situation Summary and tables ( http://www.bls.gov/news.release/empsit.toc.htm )that relate to this information, with the last update occurring October 3rd, 2003 with the September figures. If they appear while this thread is active, I'll be glad to see what the DOL says about it.

However, I'm sure that there are enough reasons for the decline so that both Right and Left will find ammunition to throw at each other.

[Sava]

Plus, most of this GDP growth was business restocking and the bubble in home buying. A lot of the consumer spending was done with credit (i.e. more debt). Krugman from the Times had a good editorial on it, I'll see if I can post it.

[JohnT]

Of course we have a higher unemployment rate - the late 90's were boom years, with the dot com rush, while the first part of this decade have been characterized by dot bombs, some big corporate scandals, and 9-11. The point is that signs are indicating that the US economy is coming out of the recession, though we aren't there yet.

[JohnT]

Originally posted by Sava
Plus, most of this GDP growth was business restocking and the bubble in home buying. A lot of the consumer spending was done with credit (i.e. more debt). Krugman from the Times had a good editorial on it, I'll see if I can post it.

Honestly, opinion pieces are worthless in talks like this. I'd rather deal with the data itself (when available, see above) and see what sort of conclusions we can draw from it, rather than depending upon yet another opinion.

[Sava]

A Big Quarter
By PAUL KRUGMAN

he Commerce Department announces very good growth during the previous quarter. Many observers declare the economy's troubles over. And the administration's supporters claim that the economy's turnaround validates its policies.

That's what happened 18 months ago, when a preliminary estimate put first-quarter 2002 growth at 5.8 percent. That was later revised down to 5.0. More important, growth in the next quarter slumped to 1.3 percent, and we now know that the economy wasn't really on the mend: after that brief spurt, the nation proceeded to lose another 600,000 jobs.

The same story unfolded in the third quarter of 2002, when growth rose to 4 percent, and the economy actually gained 200,000 jobs. But growth slipped back down to 1.4 percent, and job losses resumed.

My purpose is not to denigrate the impressive estimated 7.2 percent growth rate for the third quarter of 2003. It is, rather, to stress the obvious: we've had our hopes dashed in the past, and it remains to be seen whether this is just another one-hit wonder.

The weakness of that spurt 18 months ago was obvious to those who bothered to look at it closely. Half the growth came simply because businesses, having drawn down their inventories in the previous quarter, had to ramp up production even though demand was growing slowly. This time around growth has a much better foundation: final demand — demand excluding changes in inventories — actually grew even faster than G.D.P. So it's unlikely that growth will drop off as sharply as it did back then.

But — you knew there would be a but — there are still some reasons to wonder whether the economy has really turned the corner.

First, while there was a significant pickup in business investment, the bulk of last quarter's growth came from a huge surge in consumer spending, with a further boost from housing. These components of spending stayed strong even when the economy was weak, so there shouldn't have been any pent-up demand. Yet housing grew at a 20 percent rate, while spending on consumer durables (that's stuff like cars and TV sets) — which last year grew three times as fast as the economy — rose at an incredible 27 percent rate last quarter.

This can't go on — in the long run, consumer spending can't outpace the growth in consumer income. Stephen Roach of Morgan Stanley has suggested, plausibly, that much of last quarter's consumer splurge was "borrowed" from the future: consumers took advantage of low-interest financing, cash from home refinancing and tax rebate checks to accelerate purchases they would otherwise have made later. If he's right, we'll see below-normal purchases and slower growth in the months ahead.

The big question, of course, is jobs. Despite all that growth in the third quarter, the number of jobs actually fell. And new claims for unemployment insurance, a leading indicator for the job market, still show no sign of a hiring boom. (By the way, for the last month there's been a peculiar pattern: each week, headlines declare that new claims fell from the previous week; a week later, the past week's number is revised upward, and the apparent decline disappears.)

And unless we start to see serious job growth — by which I mean increases in payroll employment of more than 200,000 a month — consumer spending will eventually slide, and bring growth down with it.

Still, it's possible that we really have reached a turning point. If so, does it validate the Bush economic program? Well, no.

Stimulating the economy in the short run is supposed to be easy, as long as you don't worry about how much debt you run up in the process. As William Gale of the Brookings Institution puts it, "Almost any tax cut or spending increase would succeed in boosting a sluggish economy if the Federal Reserve Board follows an accommodative monetary policy. . . . The key question is, therefore, not whether the proposals provide any short-term stimulus, but whether they are the most effective way to provide stimulus." Mr. Gale doesn't think the Bush tax cuts meet that criterion, and neither do I.

To put it more bluntly: it would be quite a trick to run the biggest budget deficit in the history of the planet, and still end a presidential term with fewer jobs than when you started. And despite yesterday's good news, that's a trick President Bush still seems likely to pull off.

[Sava]

Originally posted by JohnT


Honestly, opinion pieces are worthless in talks like this. I'd rather deal with the data itself (when available, see above) and see what sort of conclusions we can draw from it, rather than depending upon yet another opinion.

I bolded the data parts... you don't have to read the rest.

link:

http://www.nytimes.com/2003/10/31/opinion/31KRUG.html?n=Top%2fOpinion%2fEditorials%20and%20Op%2dEd%2fOp%2dEd%2fColumnists%2fPaul%20Krugman

[JohnT]

One mans opinion. Lets get him to register so you can speak for yourself, Sava, instead of relying on the beliefs of others.

[Sava]

Since I'm not an economist, I tend to listen to people smarter than me.

[JohnT]

Originally posted by Sava
I bolded the data parts... you don't have to read the rest.

link:

http://www.nytimes.com/2003/10/31/op...Paul%20Krugman

Sorry, I do like to deal with cites and primary sources.

[JohnT]

Originally posted by Sava
Since I'm not an economist, I tend to listen to people smarter than me.

Liar! You pay no attention to me at all!