It’s another beautiful summer morning here in Memphis, Tennessee. On my way in to work this morning it was 72 degrees, no humidity, clear skies, and the windows were down. The big decision was “do I turn right and go to work, or do I turn left and go bass fishing?” Work always gets the nod but asking the question at least makes me feel better. So on the way in I was thinking about today’s pending economic releases and the plans I’ve heard from the government on how to “fix” the economy. More specifically I had been pondering the government’s plan to reduce unemployment by putting people to work on infrastructure projects funded by the stimulus plan. We frequently joke about the wisdom of using unemployed people from non-construction industries to build roads and bridges as it doesn’t seem efficient or safe. For instance, how many unemployed waitresses have ever tied rebar for pouring a reinforced concrete slab? I’m certain it’s not many. However, on the drive in this morning I was waiting for my turn to go through a construction zone that had funneled a two-lane road down to one-lane. As I sat there it hit me…every job site like this one has at least two people that don’t need any skill at all…these are the guys holding the “stop/slow” signs. In theory you could put all 7 million unemployed to work if you had 3.5 million construction sites that needed “stop/slow” sign holders (one guy at each end). In reality this is likely a union job anyway so we’d need 5 people per sign to get a full 8 hours of sign holding done…so 10 people per site. All we need is 700,000 construction sites like this and the government can get the unemployment rate to zero percent. I’m writing my congressman this morning…then I’m going fishing.
Initial Claims
Initial jobless claims were released at a lower level than expected this morning. This is a series that tracks the number of first time applications for jobless benefits. This number has been running north of 600,000 per week for 22 consecutive weeks. The pace has been quite dramatic. Today the number broke below 600,000 and posted a 565,000 reading. The estimate from the Bloomberg Survey was for 603,000 people to file. The series has definitely seen a slow decrease in filings over the last several weeks, today’s number was a larger drop than the trend would have indicated. It’s interesting to note that last week was a short week…how many people can you fire in a short week? And of those fired they have 1 less day to file for benefits if the government office that takes the applications is closed on Friday. It will be interesting to see if this number bounces back up next week.
Continuing Claims
Even though the pace of Initial Jobless Claims has dropped a bit, we still have a huge stockpile of unemployed people. The Continuing Claims number was expected to show 6.7 million receiving unemployment benefits, the actual release was 6.88 million. Where will these almost 7 million Americans find jobs? We still have close to 600,000 a week losing their jobs. It must be a surreal scene at the unemployment office. 6.8 million people picking up unemployment checks with the TV in the background telling them that things are getting better…the line will only be 580,000 people longer next week.
How long does it take to put 7 million Americans back to work? Where will the economic growth come from to create jobs? When you step back from the day to day process of being involved in the market and you look out over a longer horizon you don’t see a lot of factors that scream “growth”. I see massive deficit spending, higher taxes, and more government regulation; none of these things causes growth…they work against it.
Below is a graph of Continuing Jobless Claims going back to 1967. If you have any questions on this material or if there is anything I can be doing for you just let me know.
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