Although there is still no major dent in the unemployment numbers, there seems to be a slow but steady improvement in the situation. The latest weekly jobless data shows that the number of people claiming unemployment benefits had fallen for the third time in the last one month.
Initial claims for unemployment benefits fell from 456,000 to 442,000 last week. However, the number could be misleading as it was estimated after using a new seasonality adjustment factor. Without this adjustment, the claims would have stood at 453,000. Seasonal adjustment factors are used to smooth out the effects that tend to make the claims data volatile so that the underlying trend can be correctly predicted.
The moving average of initial claims for the last four weeks, which is another measure that smooths out fluctuations from the data and is considered a more reliable estimate of the trend, declined from 464,750 to 453,750. At the same time, the number of people who receive regular unemployment benefits fell to 4.65 million, which is a decline of 54,000.
Even though the weekly claims are declining more or less consistently, there is still no evidence that companies have started hiring aggressively. Most of the major companies have seen their sales and profitability improve in the last few months, but they are still skeptical about how sustainable the economic recovery will be. Until they are convinced that the growth is here to stay, it is unlikely that there would be any large scale hiring.
The situation is worse with smaller businesses, which tend to be even more cautious when hiring employees as it puts a greater strain on their finances. Many small companies are still using temporary workers to keep the business running so that they can quickly minimize their costs if another economic shock hits them in the near future.
Corporate performance has improved in the recent past, but two major headaches for the government – unemployment and poor housing market – simply refuse to go away. Unemployment rate has stayed close to 10% for some time now, and it is not improving fast enough. Similarly, the housing market is showing signs of renewed weakness with prices all set to fall once again.
Given the seriousness of the situation, many economists are hoping that the government would introduce more stimulus packages. But the administration seems to be fully focused on its reform agenda right now, with very little being done to tackle the present problems.