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Great progress on the claims front

Progress on the claims front is really becoming visible. First-time claims for unemployment (seasonally adjusted) have now dropped over 40% from their early-2009 high, and are only about 50,000 above the average level of 2005, when the economy was growing at a decent pace and labor market conditions were "normal." It might not take much longer for claims to fall another 50,000—the 4-week average of claims has fallen by 50,000 in just the past 5 months, for example.

This dramatic improvement in claims is the necessary precursor to a pickup in hiring. Companies have made tremendous adjustments in the past few years, trimming their workforce and cutting costs in order to survive. The economy has largely adapted to the new realities (e.g., there is still a surplus of housing, and residential construction is going to be very low for some time to come); workers are shifting to new industries with more growth potential; and companies are accumulating profits and waiting for new opportunities to present themselves.

The big drop in claims suggests we are getting much closer to the time when there is no more need for adjustments and belt-tightenings, and expansion plans will come to the fore. If Congress can make significant progress towards trimming federal spending, thus assuring investors and business execs that future tax burdens won't surge, and regulatory burdens will more likely ease than increase, then we could see some impressive job gains before the year is out.

UPDATE: One more (anecdotal) sign of how much things have improved: my cousin finally landed a job after searching hard for the past two years. And no sooner had he started than he was called to interview for another, better-paying job.

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