Jobless claims at 6-year low, but hiring lags
FILE - In this Wednesday, July 31, 2013, file photo, Americorps volunteer John Harris III, who is helping to coordinate a jobs fair program, fill up some documents for job seekers in Washington. The Labor Department reports on the number of Americans who applied for unemployment benefits for the first week of August, on Thursday, Aug. 8, 2013. (AP Photo/Manuel Balce Ceneta)
Americans who have a job may take comfort in knowing that companies are laying off fewer people than at any time since before the Great Recession.
The government said yesterday that weekly applications for unemployment benefits have averaged 335,500 over the past month. That’s the lowest level since November 2007, which was one month before the recession began.
But while most companies have stopped cutting jobs, many remain reluctant to hire. That’s bad news for the roughly 11.5 million Americans who are unemployed and a major reason the unemployment rate is still so high four years after the recession officially ended.
“We have seen a disconnect between the level of hiring and firing,” said Bricklin Dwyer, an economist at BNP Paribas.
Unemployment applications are a proxy for layoffs. At the depths of the recession, in March 2009, weekly claims surged to 670,000. They have fallen steadily ever since and are now half that level.
The number of first-time applications did rise slightly last week, to a seasonally adjusted 330,000. But that’s just 5,000 higher than the 5½-year low reached two weeks ago.
Most economists say small shifts like that are normal and applications are essentially at a point where they may not fall much further.
“Readings below 300K are rare and rarely sustained,” Jonathan Basile, director of U.S. economics at Credit Suisse, wrote in a note to clients.
The drop in layoffs helps explain why job growth has increased this year to an average of 192,000 net jobs a month, even while overall economic growth has stayed sluggish.
Net job gains show the number of people hired minus those who lose or quit their jobs. And when companies cut fewer jobs, it doesn’t take many new hires to create a high net gain.
The Labor Department reports layoffs have averaged 1.6 million a month through June, fewer than a monthly average of nearly 1.8 million in the pre-recession year 2006.
Hiring hasn’t bounced back as fast. Employers hired an average 4.3 million people a month this year through June, well below the 2006 monthly average of 5.3 million.
Despite the drop in unemployment applications, net job growth slowed in July. Employers created just 162,000 net jobs, the fewest in four months.
So what will it take for more companies to begin adding new workers to their payrolls?
“Really not a mysterious question,” said Gerard McLean, CEO of Rivershark Inc., a developer of web applications in Englewood, Ohio. “We’re sitting here waiting for the promise of customers. With money. Really that simple.”
But most workers are waiting for a raise. Many haven’t seen their wages increase much faster than inflation in recent years.