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August 7th, 2008

Jobless Claims Rise with Benefits Extension



Initial unemployment claims rose by 7,000 to 455,000 in the week ending August 2, the highest level observed since March 2002. In recent weeks, unemployment claims have been boosted by Congress’ 13-week extension in unemployment benefits:

Some applicants for the new 13-week extension actually found that they were eligible for new jobless benefits. Thus, “people are coming into the system that probably would not have filed absent” the extended-benefits program, a Labor Department analyst said Thursday, though the analyst was unable to say exactly how many.

The government has said this effect will lead to higher-than-expected claims for several weeks.

Perhaps the availability of new jobs provides the best indication to the state of the labor market. According to July’s numbers, finding a new job remains difficult:

Finding a new job continues to be difficult, as new hiring declined by 51,000 in July, the seventh consecutive decline in available jobs. While the decline was milder than expected, and earlier recorded declines we also revised downward, the net loss of nearly a half-million jobs since the beginning of the year points to an economy in or near recession status.

Despite recent troubles, declines in hiring have so far been mild compared to other economic downturns. The economy is growing (GDP +1.9 Q208), but isn’t strong enough to promote hiring at the moment.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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