Monday, March 7, 2011

Labor Market Indicators

The four-week average of initial unemployment claims is tracing out an Old Normal spike as it dropped to 388,500 during the final week of February. That’s the first reading under 400,000 since July 2008, and well below the latest cyclical peak of 643,000 during the week of April 4, 2009.

While initial jobless claims are declining, the average duration of unemployment shot up in February to a record high of 37.1 weeks. As a result, more people are dropping out of the labor force. The unemployment rate has dropped from a peak of 10.1% during October 2009 to 8.9% during February. Over this 16-month period, the labor force declined by 776,000. Had it remained unchanged, the number of unemployed today would be up by as much to 14.4 million, and the unemployment rate would be 9.4%. Had the labor force increased by as much as the working-age population (by 2.3 million) over this period, the unemployment rate would be 10.7%!

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