Employment Holds Steady Despite Credit Pressures
From Staff Reports
Applications for unemployment insurance dropped by a seasonally adjusted 11,000 to 330,000 for the week ended Nov. 17, the Labor Department reported last week.
While the report is no indication that the economy is well on its way to recovery, it does suggest that companies aren’t resorting to wholesale layoffs as they cope with the devastated housing and credit markets. Also, healthy employment bodes well for the holiday shopping season.
The four-week moving average of claims, which smoothes out volatility, also fell by 750 to 329,750, its lowest level since October. The national civilian unemployment rate currently stands at 4.7%, low by historical standards. Indeed, prior to the long economic expansion that took up most of the 1980s, economists believed that 5% represented "full employment."
"We continue to believe that most statistical and anecdotal evidence continue to point to a relatively healthy labor market," Omair Sharif, an economist at RBS Greenwich Capital told CNN.
At this point, wage growth has combined with a stable job market to help offset the horrendous twin assaults of the housing slump and credit crunch. Unemployment has risen in the construction, manufacturing, and banking sectors, but those losses have yet to bleed into the greater job market, or to drastically affect the overall employment rate.
The U.S. Federal Reserve predicted unemployment would "increase modestly" in 2008 before rebounding in 2009 and 2010. The Fed has cut a key short-term interest rate twice this year by a total of three quarters of a percentage point and it now stands at 4.5%. The central bank must now decide whether another reduction is warranted or poses too great of an inflation risk.
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An Optimist Jobs Report Grants the Fed Some Breathing Room
