New York — In the largest drop in the unemployment rolls in seven years, the Labor Department reported on Thursday that the total number of people collecting unemployment fell 148,000 to 6.76 million.
Is this the sign economists have been waiting for that the recession is finally losing its Rottweiler-like grip? Could some of the stimulus funds finally be getting people back to work? Or, conversely, does it suggest that the situation is getting worse as families lose unemployment benefits and don't have jobs.
Don't get too excited, cautions economist Scott Brown of Raymond James & Associates. “You don’t know if it’s because people are getting jobs or falling off the unemployment rolls because their claims have run out,” he says. “And these numbers are subject to revision.”
The more telling sign, economists say, is the number of new people signing up for benefits for the first time. These initial claims rose 3,000 to 608,000. The closely watched four-week average, which evens out the fluctuations, fell 7,000 to 615,750 – the lowest total since mid-February.
“They are trending down but the level is still high,” says Mr. Brown.
The initial claims data suggests that job losses in the coming months could be in the 550,000 range, estimates economist Joshua Shapiro of MFR Inc. This would be an improvement over the last several months, but it would still mean the unemployment rate is continuing to rise, he adds.
Earlier this month the Department of Labor reported that the unemployment rate hit 9.4 percent. While the conventional wisdom is for a peak at around 10.4 percent, some of the more pessimistic forecasters say they expect the rate to hit 11 percent next year.
Thursday's reported drop in total unemployment rolls does provide at least some relief from the economy's gloom. The number of people on unemployment had risen 21 straight weeks. And 19 of those were record highs. Now that string is broken.
– Guest blogger Ron Scherer is a Monitor staff writer.