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Claims decline, but slow progress on the jobs front

Fewer and fewer people are getting laid off these days, but the ranks of the unemployed remain large. As the first chart shows, first-time filings for unemployment claims have fallen rather dramatically in the past two years, signaling that U.S. businesses have accomplished the lion's share of the needed adjustments to a slower economy and an eviscerated housing market. This is as it should be during tough times, but we've been waiting for the other shoe to drop, which is a pickup in new hirings. To date there has been some progress, but hardly enough (1% annual jobs growth) to put a dent in the ranks of the unemployed. As the second chart shows, about 8 million people have been receiving unemployment insurance benefits since last summer. Companies are getting leaner and meaner, but what we really need to see is some meaningful expansion. That probably won't come until Congress takes substantive steps to curtail the runaway growth in government spending and entitlement programs. I think it's coming, but businesses understandably need some concrete evidence of federal belt-tightening before making new commitments to expand.

Government needs to step out of the way before business is going to step forward.

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