US initial jobless claims – economy on a sticky wicket
The US economy is in a very sticky wicket indeed, notwithstanding the above expected growth recorded during Q4’09. The recovery is mainly technical as inventory draw down is coming to a close and the inventories have gone to such levels that some restocking is essential. Question is, will the inventory stocking finally lead to production cranking up and economy starting to move up? No, because the consumer sentiments are terribly scythed.
Make no mistake, the consumers are in deep waters and unemployment rates are not going to go down very soon. If anything, there is every likelihood that the unemployment rate will inch up for some more time to come.
The data released by the US Labor Department today shows that Initial jobless claims increased to 480,000 (as against the market expectation of around 450,000) in the week ended Jan. 30, which is the highest in the last seven weeks and up from 472,000 the week before. More importantly, the number of people receiving unemployment insurance hardly changed and those receiving extended benefits actually increased, thereby signaling the difficulty of people landing up with jobs. It is also important to note that, the number of people who’ve used up their traditional benefits and are now collecting extended payments increased by about 242,000 to 5.86 million in the week ended Jan. 16.
However, as restocking slowly starts, capacity utilization has started moving wee bit up, having hit its low by the middle of 2009. Not surprisingly, productivity has started increasing. As per another report of the Labor Department, worker productivity, as measured by output per hour, rose at a rate of 6.2% (annualized) during Q4’09, resulting in an overall increase of 2.9% during 2009, which incidentally is the biggest one-year increase since 2003. Labor costs dropped by 4.4% last quarter and fell by 0.9% during the whole of 2009, which incidentally is the biggest drop in seven years.
On the upside, the large jump in productivity does hint that some employment generation will take place soon. However, the overall scenario is unlikely to change much and the overall unemployment rate will not come down anytime soon. As the initial claims number suggest, there is a clear lack of confidence that the economic recovery will be sustained. There is every likelihood that the inventory restocking based recovery will run out of steam soon.
