There are now more Americans accepting unemployment claims benefits than at any other time in history. According to data Thursday (March 26) from the Department of Labor, there are 5.56 million people now collecting unemployment benefits. This was well above the project number of 5.48 million and marks a new record high of continued jobless claims for the ninth consecutive week.

New jobless claims were up as well to a seasonally adjusted 652,000 people. This was a slight rise from 644,000 last week. Unemployment announced earlier this month is at 8.1 per cent nationally, but there are four states that are actually reporting unemployment over 10 per cent now. Michigan had a 12.1 per cent unemployment level at its February announcement. Michigan has led in this dubious category for some time thanks to the ongoing struggles and cuts at the Big 3 automakers.

Many analysts point to the fresh jobless claims data as indication that the recession is still deepening and has room to get worse. The 6.3 percent shrinkage of the gross domestic product announced Thursday was additional validation according to some. This was slightly higher than previous estimates, but a little better than some recent forecasts.

Still, there appears to be a growing contingent that feels confident in a recovery sooner-than-later. Minneapolis Fed President Gary Stern suggested that the recession could end by midway through 2009. This is even more upbeat than recent comments from Federal Reserve Chairman Ben Bernanke who said late 2009 could be the end.

Investors still seem more hopeful as well as the Dow gained 175 points Thursday to continue a more than 2-week long rally that has pushed the blue chip index back to the 8,000 mark after it dropped to around 6,500. Of course several new announcements about Obama Administration plans to support credit and mortgage markets have helped ignite the stock rally.

So is today’s job data truly a damper on the growing optimism. It certainly is possible, but the trend of growing jobless claims might continue beyond signs of a pending economic recovery. Recent housing data that has been modestly better, along with some positive credit news, have helped encourage economists. Jobs could likely be a laggard in the economic recovery once it gets under way.

Even economists that are confident in a 2009 end to the recession seem to believe unemployment still has room to grow. Several have forecasted a peak of 10 per cent unemployment by early 2010.

If the economy is improving why would unemployment continue to grow? Because of the depth of the economic trouble, employers that have slashed jobs or put off business expansion are likely to wait for clear signals that things are better. Thus, consistent improvement in housing, credit, and retail data may spark and end to the recession. But, the response by businesses to offer more jobs might be delayed.

Neil Kokemuller
9:46 PM EST
Thursday, March 26, 2009

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University.
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