Thursday, July 24, 2003

Has the US unemployment rate peaked?
The number of Americans lodging new jobless claims dropped to the lowest level since February, the government said on Thursday in a report showing surprising strength in the long-depressed U.S. job market.

The level of new claims, which gives an early reading on the resilience of the job market, plunged by 29,000 to 386,000 in the July 19 week, down from a revised 415,000 in the prior week, the Labor Department (news - web sites) said.

New claims were far below Wall Street expectations for 413,000 applications, and the lowest since the week of Feb. 8. It was also the first time since then that initial claims were below the critical 400,000 mark, a level viewed by economists as the sign of a soft jobs market. Claims had been above 400,000 for 22 straight weeks.

Still, a Labor spokesman urged caution in reading too much into one week's figure, saying "it is not uncommon for the series to exhibit volatility during July because of traditional temporary layoffs in industries such as automobiles, textiles and apparel."
The geographic dispersal of these numbers is interesting. The South continues to get hammered by layoffs; the five states with the biggest rise in initial jobless claims were North Carolina, South Carolina, Georgia, Tennessee and Alabama. Manufacturing continues to be very weak in this region. Wisconsin and Massachusetts led the pack of states experiencing the biggest fall in claims this week.

While there was a big drop in the number of initial claims, the number of Americans drawing unemployment insurance for the week only dropped 0.67%. Over 3.6 million Americans are still on the dole.

Nonetheless, cautious optimism seems to be seeping throughout the business punditocracy. 2003:II GDP figures come out one week from today. It will be very interesting to get this backwards glance at the overall economy.

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