new jobless claimsIn today's economy, still dealing with the aftereffects of the financial crisis and Great Recession, you have to stay especially tuned to subtle, and sometimes obscure, changes that can signal better times are ahead.

One such bit of news last week was that initial jobless claims remained below the 400,000 level for the second consecutive week, falling 20,000 to a seasonally adjusted 368,000 -- the lowest level in almost three years. However, while we often hear economists and business news anchors referring to the "psychologically significant 400,000-level," hardly do they ever bother to explain why the 400,000 level is so important.

So, here's the lowdown:

Most investors know that even during times of strong economic growth, job losses occur. Some companies shed workers because they're not performing as well as competitors, firms merge and require fewer employees, new technologies displace workers, companies transfer jobs overseas and so on. Layoffs occur for dozens of reasons -- and they occur even in the best of times.

Similarly, most investors know that layoffs -- and therefore new jobless claims -- rise during recessions.

The Historical Trends

Since the mid-1970s, when U.S. GDP hit $1.5 trillion -- about $6.7 trillion in 2011 dollars -- it's been hard for weekly new jobless claims to fall below 400,000, and even more rarely to fall below 370,000.

Given the size of the U.S. workforce, if jobless claims stay below 400,000, it suggests that companies are seeing sufficient demand to retain employees, with many likely to add jobs, provided the economy continues to grow.

The two recent U.S. economic expansions provide good examples:
  • During the 2002-2007 expansion, jobless claims fell below 400,000 beginning in late summer 2003, then remained below 370,000 for about four-and-a-half years, from fall 2003 to spring 2008. Jobless claims started rising in December 2007, which we now know marked the start of the Great Recession.
  • During the Roaring '90s, a period of enormous technological innovation, business formation, corporate earnings growth and massive job creation (more than 22 million new jobs), jobless claims basically remained below 350,000 for five years, from spring of 1996 to winter of 2001. During this period, the U.S. unemployment rate fell from 5.6% to 3.9%.
Conversely, sustained rises in jobless claims above 400,000 are viewed as a danger sign that economic growth is slowing, or even worse, falling into a recession. During the 2001-2002 slump, jobless claims flirted with the 400,000-level in mid-2001, then remained at or near that level until the fall 2003.

The Direction Is Clear

And, of course, during the financial crisis-magnified 2007-2009 Great Recession, jobless claims started to rise in the second half of 2007, pushed above 400,000 in the summer 2008, then soared above the truly ghastly 600,000 level during the crisis's acute stage in the winter 2009.

Since those scary months, progress in lowering jobless claims has been arduous, but the trend is clear: They've fallen from a high above 640,000 to last week's 368,000.

And February's nonfarm payroll report, which indicated that the U.S. economy added 192,000 jobs in the month, up from a revised 152,000 in January and 63,000 in December, provides additional evidence that the job market continues to heal and that the U.S. economy is progressing to a self-sustaining expansion.

Investors -- and job-seekers -- can use those two stats to get a quick read on the U.S. economy's health. If the nation keeps adding 200,000 to 300,000 jobs per month (or more) and if jobless claims remain below that significant 400,000 level, better times are ahead for job-hunters, corporate earnings and the world's largest economy.

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Dereck

Major Fraud Alert


The entire Federal Banking System under FirstGov has been "Consumed" and "Levied" by way of a Maryland State Circuit/District Court Ruled “Appropriation and Garnishment” of all Future Earnings prior to and after 2004 against Bank Of America by way of the F.D.I.C. Regulations Prohibiting failing Banks from Merging with other failing Banks between the Dates of 08/04/08 and 10/09/09.

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May 29 2011 at 12:42 AM Report abuse rate up rate down Reply
inasctg56

For every 10% increase in exports equals a 7% gain in jobs. This administration has worked with our manufacturing sector since day one and has negotiated better trade deals and we are seeing the results. Forecasts for 2011 is an additional over 2 million in jobs. It's the manufacturing pay checks that come back into our communities that drives our economy and creates demand.

March 09 2011 at 1:14 PM Report abuse rate up rate down Reply
donut999

actually, the number means nothing until we return to full employment. that used to mean a job was available for just about anyone that wanted one. we are always going to have a minimum of 4-6% unemployment because there are a certain number of folks who are slackers and either get fired this week or pressured in to quitting. and, don't forget those who say they want a job, but really don't. and, no matter how healthy the economy might week in a given week, a few business owners will blow it and have to lay off employee's. new claims have to decline. simple fact of diminishing returns. when the pool of people who could be laid off is reduced, layoffs will decline. a manufacturing plant that used to have 1000 employee's might only have 500 today, but they can't operate the place with 490.

March 08 2011 at 3:35 PM Report abuse rate up rate down Reply
kenneth

Good article until the last paragraph, where Mr. Lazzaro talks about adding 200 to 300 thousand new jobs per MONTH (something we have not experienced in a long time) and then talks about new unemployment claims at a rate below 400,000 per WEEK. Unless one pays careful attention, it is easy to infer that these 2 numbers are comparable. NOT! 400K per week translates to 1.7M per month. Compare that number (1.7M) to the .2M to .3M new jobs to get a much more sobering idea of just how far we have to go to stabilize or grow the economy.

March 08 2011 at 10:29 AM Report abuse -1 rate up rate down Reply
1 reply to kenneth's comment
warrenbent

Actually, you are correct the numbers are not comparable, but it's for precisely the opposite reasons you state. The jobless claims numbers are for INITIAL jobless claims, meaning this information is specific to new filers for unemployment benefits, and not an attempt to address how many current benefit recipients may have found jobs. As such, it says very little about TOTAL benefit recipients. By contrast, the BLS non-farm payroll report measures NET additions to the job market. Meaning a figure of 200,000 (for example) illustrates that 200,000 more people are employed this month than last.

March 08 2011 at 10:54 AM Report abuse +1 rate up rate down Reply
Hello Bob

You know, I am continually amused by the naysayers' posts. They cannot handle any good news. They would rather piss and moan than get their asses in gear. Recessions are a natural part of any economy, historically occuring about every 6 to 7 years. But since Reagon was in office the government has tried to mitigate and delay recessions, which only makes them worse when they inevitibly happen. Recessions are tough on people and businesses, but serve an important function by flushing out the system by getting rid of the crap that tends to build up. They also serve as an opportunity maker. Many new ideas come forth as well as the creation of all kinds of businesses and thus jobs. So, the point of this epistle is - get off your ass, quit your whining and get going.

March 08 2011 at 8:26 AM Report abuse rate up rate down Reply
3 replies to Hello Bob's comment
inasctg56

There are so many positive financial reports and yet the gop followers find fault with each and every one. Fact: Manufacturing gains for 19 consecutive months and the economy has grown for 21 months and our exports have seen double digit gains - and the new $45 billion in trade with China hasn't taken effect yet. We are on the right track if the gop doesn't interfere with job cuts and cuts to job creation. There are many areas to be cut in waste and defense they won't go near.

March 07 2011 at 10:53 PM Report abuse +2 rate up rate down Reply
1 reply to inasctg56's comment
donut999

good point about other cuts. who would ever think you could say $50 billion is peanuts. in the grand scheme, it is. do some math. about $50 billion to gm and chrysler that will likely be a write off someday. 3 times that much to bail aig which will very likely be a write off. pick your favorite 50 to 200 billion boondoogle. if anyone wants to make real strides against a projected deficit of $1.4 trillion (+ or minus $50 billion since it is peanuts), then they need to get in to the meat called non-discretionary spending. the silly politics over $50 billion in discretionary spending is just a game on both sides of the aisle and diverts everyone's attention from the real problem.

March 08 2011 at 3:45 PM Report abuse rate up rate down Reply
martinsportraits

More delicious Kool Aid from my favorite Hack journalist Joe ''feelin' good'' Lazzaro! If your child was dying of cancer this guy would put a positive spin on it!

March 07 2011 at 10:09 PM Report abuse -1 rate up rate down Reply
smithpet8

I reaing a new post. Seems there is an awful lot of "I'm a powerless , Hopless, Helpless Victim". If nothing I've tried works, I'll just throw up my hands and give up. >>>GGood Solution??? May just try to innovate, isn't that what made America so great??? OPINION.

March 07 2011 at 7:33 PM Report abuse rate up rate down Reply
smithpet8

I think if oil goes over 120.00 per barrel, we're gonna see mor of the dreaded "R" word, Recession. But for now lets not let it cause too much panic. Afterall if they blow up all the oil wells, What'll they do? If it ain't bringing in mmoney, you can't drink the stuff as a shake. If the US economy goes south, just remember. If the major economies get a cold, Libya included, We all get to sneeze together. Afterall it's a global economy, like it, or not. What effects one, effects all. Just a thought. That's my personal opinion. SPEAKING FOR MYSELF.

March 07 2011 at 7:27 PM Report abuse rate up rate down Reply
smithpet8

I think if oil goes over 120.00 per barrel, we're gonna see mor of the dreaded "R" word, Recession. But for now lets not let it cause too much panic. Afterall if they blow up all the oil wells, What'll they do? If it ain't bringing in mmoney, you can't drink the stuff as a shake. If the US economy goes south, just remember. If the major economies get a cold, Libya included, We all get to sneeze together. Afterall it's a global economy, like it, or not. What effects one, effects all. Just a thought. That's my personal opinion. SPEAKING FOR MYSELF.

March 07 2011 at 7:27 PM Report abuse rate up rate down Reply