The number of applications submitted for unemployment insurance in the week ending August 25 remained flat from the previous week. The revised seasonably adjusted figure for the week ending August 18 rose to 374,000 and the report released Thursday by the Employment and Training Administration showed the same figure for last week.
Due to the increase of 2,000 initial claims in the week ending August 18, the 4-week moving average increased to 370,250. The Insurance Unemployment Rate hasn’t changed all month and has been fixed at 2.6%. The total number of people receiving unemployment benefits dropped 5,000 from 3,321,000 to 3,316,000. This figure has decreased by 11% from this time last year.
Analysts speculate that as long as the figure of first-time claims remains under 375,000 there is a good chance of modest job growth for the month, which could cause the unemployment rate to drop. However, people need to remember that there are other variables that go into calculating the unemployment rate, including people who drop out of the labor market or return to it.
In July, we saw the best job gains in five months. The labor market had been plagued by growth figures below 100,000 so the 163,000 jobs that were created in July took many economists by surprise. It wasn’t a high enough number to satisfy voters, but it was higher than experts anticipated and a sign of some measure of improvement in the labor market.
However, the unemployment rate still rose slightly. The reason this happened was because there were 260,000 fewer discouraged workers which means a significant amount of people re-entered the labor market to search for work. If job growth isn’t enough to offset this number or overshadow it then the unemployment rate will likely increase to some degree.
The same thing could happen in August. The job gains were higher than expected in July. People will see this as a sign of mending in the labor market and will resume looking for employment. The fact that this number was so high in July is good news in and of itself because that means people feel confident there is mending in the labor market and are returning to it.
The reason the unemployment rate is at 8.3% and has been as low as 8.1% this year is because so many people left the labor market. They were discouraged by the lack of opportunity available to them.
We are still seeing initial unemployment insurance claims between the 350,000 and 400,000 range we have seen all year. Since the number of applications has remained under 375,000, economists can feel a bit optimistic about job gains this month because the layoffs side is looking better than it did six weeks ago. That being said, these figures are still too uneven to cause a noticeable boost in consumer confidence.
Many people wait with anticipation to see the employment figures for August. The level of growth will help influence the Federal Reserve’s decision on whether or not to take action to help stimulate economic growth. Economists at the Fed are considering a bond buying program to boost outlook. The jobs report is due September 7.
