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This paper is in response to the article, “Jobless claims flat indicators signal slow growth” that appeared in the online version of the Chron journal on Nov 19, 2009. The article details the rise and fall of the unemployment rate as reflected in the figures for jobless claims that are recorded by the US government. The article makes the point that initial jobless claims are falling and this means that the US economy is slowly starting to find its feet again.
The figures released by the US government show that the unemployment rate has more or less remained stable at 9.2%. According to the article, “The Labor Department said first-time claims for jobless benefits amounted to a seasonally adjusted 505,000 last week. That was the same as the previous week’s revised figure, and it matched analysts’ expectations. A year ago, there were 533,000 initial claims.” (Chron 5)
What this indicates is that the jobless claims or the workers getting fired have actually come down taking last year as the base. However, the unemployment rate still remains high. This is because of the fact that the figures for jobless claims do not indicate the number of people who have exhausted the benefits given by the state when they are out of work. Since they do not qualify for welfare benefits, they are not reflected in the numbers of people who are counted as part of the jobless claims or those claiming unemployment benefits.
As the article makes it clear, “But the continuing claims figure does not include millions of people that have used up the regular 26 weeks of benefits typically provided by states. They are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.” (Chron 17) This means that the actual unemployment rate would be much higher if one takes the numbers of all these workers into account.
The other points mentioned by the article are about the indicators that measure the health of the economy and report on its progress. To quote from the article, “Separately, the Conference Board said its index of leading economic indicators rose 0.3 percent last month, less than analysts had expected. That indicates a slow, bumpy recovery next year. The index forecasts economic activity by measuring jobless claims, stock prices, consumer expectations, building permits for private homes, the money supply and other data. A gauge of consumer expectations, which are dropping as unemployment continues to rise, weighed down the index. Uneasy consumers likely will curtail their spending, which powers about 70 percent of the U.S. economy.” (Chron 9)
The macroeconomic concepts that the article discusses are the rate of unemployment and the other indicators like stock prices and consumer expectations. As the above paragraph has shown, the article takes the index of leading economic indicators as a benchmark to track the progress of the economy. An index of economic indicators is usually a good way to measure the state of the economy as each of the indicators by themselves does not tell the whole story.
By making a composite index of all the parameters, the broad range of economic activity can be gauged in the economy. Likewise there are indices that measure a basket of indicators like inflation, growth of money supply, unemployment rate etc. The use of these indicators is a reflection on the state of the economy and the index to track the indicators may reveal the broad based progress of the economy.
The unemployment rate in the US is a composite figure that is arrived at after calculating the number of people who have filed for initial jobless claims and the number of people who are already taking the benefits. It also includes the number of people who are actively looking for jobs. What it does not indicate or calculate is the number of people who are not looking for jobs and the number of people who are on part time employment. Further, the unemployment rate as measured by the government does not include the people who have exhausted their unemployment benefits time period.
Hence, the unemployment rate differs with the bureau that is calculating it as each of them has separate measures to calculate and track the progress of the unemployment figures. This is the reason why there are different rates of unemployment as measured by different agencies. This may explain the variance that one experiences when one sees different estimates of the unemployment figures.
In conclusion, the article is relevant and timely as it pertains to the state of the economy and the health of the economy as measured in the economic indicators that the article cites as evidence. In my opinion, the article raises some valid points about why we are not still out of the woods despite some of the indicators being good. This shows that depending on the kind of indicator one uses, one gets a different picture of the economy. Hence, a composite index is the best way to assess the true state of the economy.
Works Cited
Associated Press. “Jobless claims flat, indicators signal slow growth”. Chron Business. Web.
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