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The good and bad news about unemployment claims

Unemployment claims continue to tell us that the economic fundamentals are gradually improving. On an unadjusted basis, the number of first-time claims is down almost 10% from a year ago. There is still no sign at all of a deterioration in the jobs market, and this all but rules out a recession. Claims keep falling, and the number of jobs keeps rising, and those are hallmarks of recovery. On an unadjusted basis, the number of people currently "on the dole" is down over 17% from a year ago. More and more people have an incentive to find and accept a job, and that is a very positive change on the margin.

Unfortunately, as the above chart shows, the portion of the labor force that is receiving unemployment compensation is still extremely high from an historical perspective. Congress was never more generous in its willingness to extend unemployment benefits in this business cycle, and the recovery was by far the worst in modern times. Could there be a connection between those two facts? Yes. When you pay people to not work, don't be surprised if you find that more people are not working. 5.66 million are still receiving unemployment checks today, substantially more than the 4.6 million who were receiving unemployment checks at the peak of the 1981-1982 recession. As a percent of the labor force, the number on the dole today is still far worse than most of the recessions of the past 30 years.

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