New claims for unemployment benefits jumped last week to a 16-year high, the Labor Department said Thursday, providing more evidence of a rapidly weakening job market expected to get even worse next year.
The government said new applications for jobless benefits rose to a seasonally adjusted 542,000 from a downwardly revised figure of 515,000 in the previous week. That's much higher than Wall Street economists' expectations of 505,000, according to a survey by Thomson Reuters.
That is also the highest level of claims since July 1992, the department said, when the U.S. economy was coming out of a recession.
The four-week average of claims, which smooths out fluctuations, was even worse: it rose to 506,500, the highest in more than 25 years.
In addition, the number of people continuing to claim unemployment insurance rose sharply for the third straight week to more than 4 million, the highest since December 1982, when the economy was in a painful recession.
This is not good news. However, there is a silver lining in a somewhat reverse psychology way (or at least I think so).
Remember, I'm working from the assumption that the worst we'll see in job losses is a 50% loss of all jobs created during the last expansion. Accelerating job losses indicate we're moving into phase 2 of the recession -- the period when companies start laying off larger numbers. Compounding this issue is we're at the end of a fiscal year for most companies. Management is thinking, "let's just get this over with before the end of the year so it's reflected on this year's earnings." It's akin to ripping the bandage off quickly simply to get it over with.
I still think we're going to see the recession end by the third quarter of next year. A fair amount of that thinking is based on an aggressive response from the incoming administration. In a recent column I advocated for a massive fiscal stimulus. Assuming this occurs I think we'll be alright.
For more on my thinking regarding this subject see this article