Claims Drop as Jobless Exhaust State Benefits

From the Wall St Journal  | July 24, 2009

By KELLY EVANS

(See Corrections & Amplifications item below.)

The number of workers on jobless rolls is declining in an
encouraging sign for the U.S. economy, although the decrease partly
reflects people exhausting their state benefits.

The Labor Department said Thursday that about 6.2 million workers
received weekly unemployment benefits, known as "continuing claims,"
from their state in the week ended July 11, down from a peak of nearly
6.5 million in late March. The number of new weekly claims also is down
from its spring highs.

"It's
a good sign," said J.P. Morgan economist Abiel Reinhart. "It does look
pretty consistent with what happens right around the end of a
recession."

Displaced workers are typically eligible for 26 weeks of state
unemployment benefits, at which point most who remain unemployed begin
to receive federal unemployment benefits under the Emergency
Unemployment Compensation program. As more workers join the ranks of
the long-term unemployed, they move from state rolls to federal
benefits, which is partly why the number of continuing claims is
declining.

The Labor Department's tally of initial claims for unemployment
insurance rose by 30,000 to a seasonally adjusted 554,000 for the week
ended July 18. But there were signs that the pace of newly jobless
workers is slowing. The four-week average of new claims for
unemployment benefits, which smoothes out weekly volatility, declined
to 566,000 last week, its lowest level since January.

"If by mid-August the four-week average of claims remains
significantly below 600,000, we will be very encouraged that the
recession has indeed ended," John Ryding, chief economist with New
York-based RDQ Economics, wrote in a note to clients.

But he and others caution that the end of a recession doesn't
necessarily mean a quick improvement in the labor market. Most
economists expect the nation will continue to shed jobs through the
fall, adding to the 6.5 million lost in nonfarm employment since the
recession began in December 2007. The unemployment rate, 9.5% as of
June, is still expected to hit double digits later this year.

Labor Department data also show that the number of workers receiving
extended federal unemployment benefits continues to rise, hitting about
three million in the week ended July 4, the most recent data available.

Write to Kelly Evans at kelly.evans@wsj.com

Corrections & Amplifications

The Labor Department's tally of initial claims for unemployment
insurance rose by 30,000 to a seasonally adjusted 554,000 for the week
ended July 18, but there were signs that the pace of newly jobless
workers is slowing. This article incorrectly characterized the
indications of a slowdown as a decline in the total number of
unemployed workers.