Friday, February 12, 2010

Misguided Economists Say Unemployment Rate Has Peaked

Economists are giddy once again, following news that weekly unemployment claims dropped to 440,000. http://www.workforcesecurity.doleta.gov ... 021110.asp

"In the week ending Feb. 6, the advance figure for seasonally adjusted initial claims was 440,000, a decrease of 43,000 from the previous week's revised figure of 483,000. The 4-week moving average was 468,500, a decrease of 1,000 from the previous week's revised average of 469,500."

Weekly Claims 2010-02-11



As good as the one week seasonally adjusted drop of 43,000 looks, the track record of the Department of Labor is to revise numbers up. Moreover, the four-week moving average did not budge. Finally, please remember that it will take a minimum of 100,000 to 120,000 jobs a month just to hold the unemployment rate steady.

Misguided Forecasts

With that backdrop, please consider U.S. Economy to Strengthen, Reducing Unemployment, Survey Says. http://www.bloomberg.com/apps/news?pid= ... c7_E&pos=6

U.S. unemployment peaked in October and will retreat through 2011 as the economy strengthens, according to economists surveyed by Bloomberg News.

The world’s largest economy will grow 3 percent this year and next, more than anticipated a month ago, according to the median estimate of 62 economists polled this month. The jobless rate, which reached a 26-year high of 10.1 percent in October, will end the year at 9.5 percent.

Efforts to rebuild inventories, investments in new equipment and software and improving sales overseas will spur employment and household spending. Scant inflation will give Federal Reserve policy makers room to keep the target interest rate near zero through the third quarter, buying the economy enough time to reach a self-sustaining expansion.

“It’s a matter of time before strength in the economy effectively feeds on itself, with more employment leading to stronger spending, which in turn leads to more employment,â€