The United States Department of Labor just released promising information regarding unemployment claims for the previous week. The announcement included information regarding the seasonally adjusted initial claims and stated that last week’s number of unemployment claims equaled 381,000, which equals a 23,000 decrease in claims from the previous week. The average 4-week claim number also decreased by 3,000 from last week’s 4-week average. These numbers correspond with a continuing trend during the last month of a decrease in unemployment claims.
The decrease in unemployment claims is an important indicator of economic health and growth. The number that economists look for is 400,000. CNBC calls this number “psychologically important.” According to MarketWatch, claims below this number indicate faster economic growth and the creation of more jobs. CNBC speculates that applications for unemployment need to be under 375,000 consistently to decrease the unemployment rate. MarketWatch notes that weekly claims averaged around 370,000 to 380,000 when the economy began to generate more jobs after the last recession in the fall of 2003. If weekly claims continue to fall, this could be an indication that more jobs will be created and the unemployment rate will decrease.
However, the decrease of 23,000 is only the measurement for one week. Weekly figures can be volatile and in themselves cannot be conclusive measurements of the health of the economy. Market Watch suggests that economists look more closely at the monthly average, which has dropped by over 3,000 claims. This number is more suggestive of economic health, a faster rate of job creation, and economic progress.
This release comes after a few other indicators of economic growth. Reports have been released regarding increased sales in retail businesses throughout the holiday season, a leveling of employee earnings, and an increase in consumer credit use. Taken together, these factors point toward a welcome growth in the economy. The overwhelming number of sales across the nation, particularly on Black Friday and Cyber Monday, may be a positive indication of what is to come. While it is difficult to say what type of money consumers were spending, whether it was funds they had in savings or unemployment compensation, it is safe to assume that consumers are more comfortable with their financial situation. When the economy is healthier, consumer confidence increases, investors are more likely to invest, and more jobs are created.