By Casey Quinlan
Initial Jobless Claims rose this week but the general trend shows claims are consistently dropping and employers are beginning to hire again.
After four straight weeks of drops in jobless claims, the number rose to 362,000 claims. The four-week moving average, a less volatile representation of jobless claims, moved up to 355,000 claims, not far from the previous week’s figure, which reflects a consistent downward trend in claims.
Together, states with a decrease of more than 1,000 claims, declined by more than 10,000 claims. This week’s increases of more than 1,000 claims were partly influenced by school vacations, with layoffs in school bus transportation.
The unemployment rate held at 8.3 percent in February, causing the stock market to rebound strongly and the Volatility Index, or “fear index,” is down.
Nicholas Bloom, associate professor of economics at Stanford University, said the country is finally seeing a recovery after a long recession.
“Now in early 2012, it looks like the recovery has really started. Unemployment is falling rapidly and employment is rising. The stock market has risen a lot because the stock market is forward thinking and the falls have been reasonably persistent,” Bloom said.
Bloom is optimistic that the rest of 2012 will see a continued recovery after the end of massive policy uncertainty in the U.S. and Europe. Bloom said he would not be surprised if unemployment dropped to anywhere between 7.5 and 7.7 percent by November’s general election.
“For the last four years there have been endless debates about economic policy in the U.S. and Europe that have generated massive uncertainty, leading firms to be cautious and delay investing and hiring,” Bloom said. “Finally that political uncertainty seems to be subsiding.”
Government employment and construction employment fell in February but manufacturing has added more than 30,000 jobs and temporary jobs continue to grow significantly. Though temporary jobs do not signify long-term stabilization, the addition of temporary jobs shows that employers are investing in the economy again.
Janet Currie, Henry Putnam Professor of Economics and Public Affairs at Princeton University, said the economy will stay on track after considerable job growth despite the fact that the housing sector has not fully recovered and the European economy is still at risk.
“A lot of sectors like auto industry are turning around. It was a puzzle that companies that were doing better were still firing but now they’re changing how they look at where the markets are going,” Currie said.
The labor force participation rate has continued to decrease but other unseen factors besides the long-term unemployed could affect the rate, such as the number of people that have decided to wait out the recession in school or an increase in the number of retiring baby boomers.
“The labor participation rate is very cyclical. If a 50-year-old woman drops out of the market because she’s redundant at her job and she stops working, there is a chance she is getting an online education and we don’t know,” Bloom said.
The participation rate increased a lot in the 1970s and 1980s because baby boomers and a rising number of women were entering the workforce producing numbers that would have changed regardless of the recession. The The Brookings Institution’s Hamilton Project, which studies how many jobs it will take to get to pre-recession employment levels, has projected that America’s changing demographics of aging baby boomers will permanently change participation rate expectations. Assuming the economy had fully recovered, the labor participation rate was expected to decline to 90,000 people in 2018.
Despite jobs sector growth, it is important to remember that many Americans remain out of work. Although the economy is returning to health, the number of people who rely on emergency and extended payments increased by more than 25,000 claims and 12.8 million people are still unemployed.