For the second time in the last month, initial jobless claims dropped dramatically. First time unemployment claims dropped 23,000 last week to a seasonally adjusted 369,000. Earlier this month, claims fell to a four and half year low of 342,000. The less volatile four week average stands at 368,000. These numbers are consistent with moderate job growth.
Companies have begun to announce their targets for holiday hiring. This time of year sees tens of thousands of people hired to part time positions for the Thanksgiving and Christmas holidays. Shoppers will be out in full force, and the fourth quarter is generally one of the stronger performers in our consumer driven economy. The boost is temporary though, comparable to a sugar high.
The unemployment claims, along with a few other economic measures, indicate we should have another month of around 125,000 jobs created by the end of October. That number is good enough to keep up with population growth, but not strong enough to quickly drive down the unemployment rate. In order to attain full employment, we will likely need government action of some sort, at least enough to fix the upcoming fiscal cliff.
We are now beginning to hear talk of what components could make up a deal to avert the fiscal cliff, which is a combination of spending cuts and tax increases due to occur on January 1, 2013. Democrats are talking about adding an extension of the payroll tax holiday and an extension of emergency unemployment benefits to keep money in the hands of consumers and keep the economy humming. Republicans wish to avert the massive defense cuts that the Pentagon is warning could weaken the military. In order to accomplish these goals, we will likely have to cut programs elsewhere, and raise taxes on the wealthy. Thus far, Republicans have been unwilling to raise any revenue. With the fiscal cliff now within sight, those attitudes may begin to change.
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