New Unemployment Claims

As recently as early fall we were hearing a lot of nonsense about a double-dip recession.*

Now, new unemployment claims have started dropping fairly consistently. I know enough not to immediately claim that the job market is going to improve substantially and soon. But, I also know enough to point out that we are in the right range of time since the run-up in claims for there to be substantial and sustained improvement. Check it out:

  Hat tip to Angus for the chart.

What I want you to look at is not the height or steepness of the peaks … that’s when we were in panic mode.

Instead, look at the width of the bases of the “mountains”. Here, the most recent recession matches up nicely with the last four recessions, and also with the regional quasi-recession of the mid/late 80’s (not everyone remembers that one, but it was pretty rough from Louisiana up through Idaho for a couple of years there).

I am not a charter! I do not look for patterns and then create explanations. Having said that, there is an explanation laying around that will produce that pattern. There’s good psychological reasons to think that any business fluctuation induced unemployment, by either nominal wage rigidity or zero marginal product, might take a few years to start clearing out as individuals’ self-image adjusts to reality.

* Duh … it can’t be a double-dip if the recession is already over. It might be a second recession close on the heels of the first one … but that’s a lot harder for clueless journalists to state.