Unemployment Claims Drop To Pre-Recession Levels
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More than 330,000 people filed new claims for unemployment insurance benefits last week. And that sounds like a big number and is a slight increase over the previous week, but it's being taken as some very good news. For a month now, fewer new people are asking for unemployment insurance than at any time since November 2007, that's before the Great Recession.
Adam Davidson with NPR's Planet Money Team has been studying the numbers and joins us now. Hey there, Adam.
ADAM DAVIDSON, BYLINE: Hey, Audie.
CORNISH: So, 330,000 people newly unemployed, how can that possibly be good news?
DAVIDSON: In a word, Audie: froth. That is the actual technical term that economists use. There is a lot of froth in our economy even when it's very healthy. The U.S. economy is massive. There's like 150 million-plus jobs. And a lot of those jobs are short-term contract kind of jobs.
My dad is an actor, which means he's in and out of work all year long. Lots of people have those kinds of gig-type jobs. You know, trades people like carpenters and plumbers, truck drivers. And that is very normal, people leaving work for a few weeks, getting unemployment insurance and then coming back into the workplace - even when the economy is doing great. Even when it's growing and unemployment is low, we expect to see that. That's called normal froth. And the numbers we've been seeing this summer, we are back to the days of normal froth. And that is really good news.
CORNISH: OK. So if this is normal, how bad is abnormal froth?
DAVIDSON: Well, that's exactly what we've dealt with for the last several years, abnormal froth. So we have that normal process of people coming in and out of the workforce. But then we have this extraordinary thing of people losing their jobs and just staying unemployed for months and months, and years and years. And, as you know, over the last five years, we've had people unemployed for longer periods of time than ever before in U.S. economic history.
It was really, really bad. So that's why we're excited to see the numbers back down to something reasonable.
CORNISH: And is this true across the entire economy? I mean, are new unemployment claims down everywhere?
DAVIDSON: They are down everywhere but not by the same amounts. There are still a lot more people than normal on unemployment benefits, especially in the Northeast. New Jersey, Connecticut, Pennsylvania, New York saw a bit of an increase last week. Interestingly, some of the worst affected states during the recession, like California and Florida, saw some good news last week. They had especially large drops in unemployment claims.
When you go through industries, you see a similar trend. The people who had it worst have seen the fastest move in the right direction. So construction added a lot of jobs, manufacturing added a lot of jobs in the past year. Although both of them still have higher than normal unemployment; especially construction, it's still around nine percent - very, very high, but nowhere near the 20 percent we saw a few years ago.
There's a lot more work for farmers this summer than there was last summer. And this may not be a surprise to anyone, but finance is doing great. They have a lower unemployment rate than any other major industry.
CORNISH: Adam, what about the Fed? I mean, they have a mandate to get unemployment down. Does this mean that their work is done?
DAVIDSON: That is actually what some people are afraid of. And this is one of the paradoxical things about economics, sometimes good news can turn out to feel like bad news - at least to some people. This does suggest that the Fed feels a lot less pressure to get the economy cooking. And, you know, they're doing all these extraordinary things, especially the Quantitative Easing program, where they buy lots of long-dated bonds to kind of pump money into the economy. And this suggests that they are going to slow that down.
We are ready knew they were going to begin to taper fairly soon, probably as soon as next month. But these numbers being good suggests that the Fed will feel free to end their extraordinary measures sooner than later. Some people don't want them to. And so, some people will take this good news paradoxically as bad news.
CORNISH: NPR's Adam Davidson with our Planet Money Team. Adam, thank you.
DAVIDSON: Thank you.
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