New unemployment benefits claims fall 15,000 last week

WASHINGTON ― New claims for unemployment benefits fell by 15,000 last week in the latest sign the labor market was improving and could help the country resist the effects of a likely euro zone recession.

Initial claims for state unemployment benefits dropped to a seasonally adjusted 372,000, the Labor Department said on Thursday. The prior week’s claims data was revised up to 387,000 from the previously reported 381,000.

Economists polled by Reuters had forecast claims falling to 375,000. A Labor Department official said there was nothing unusual in the data, although the figures for three states, including California and Virginia, had been estimated.

Claims have now fallen in four of the last five weeks, and the four-week moving average ― a better measure of trends – fell 3,250 to 376,500, the lowest level since June 2008.

Economists at Goldman Sachs said in December that weekly claims below 435,000 pointed to net monthly gains in jobs.

An improving labor market has boosted the view the economy wrapped up 2011 on better footing, leaving it well positioned to deal with headwinds from Europe’s debt crisis and fiscal tightening at home.

Still, a moribund U.S. housing market and persistently high unemployment threaten the recovery.

In the week ending December 24, the number of people still receiving benefits under regular state programs after an initial week of aid fell 22,000 to 3.595 million. Economists had forecast so-called continuing claims holding about steady at 3.58 million.

As of Dec 17, a total of 7.223 million people were claiming unemployment benefits under all programs, down 8,311 from the prior week.

Data on Wednesday showed U.S. manufacturing growing at its fastest pace in six months during December, capping a late-year upswing.

Fourth-quarter growth is seen topping a 3 percent annual pace, rising from the July-September period’s 1.8 percent rate.

Unemployment rate drops to 2½ year low – 8.6 percent

WASHINGTON ― The unemployment rate fell to a 2-1/2 year low in November, even though the pace of hiring remained too slow to suggest a significant quickening of the recovery.

Nonfarm payrolls increased by 120,000 jobs last month, the Labor Department said on Friday, and the jobless rate dropped to 8.6 percent, the lowest since March 2009, from 9.0 percent in October.

It was the biggest monthly decline since January. While part of the decrease was due to people leaving the labor force, the household survey from which the department calculates the unemployment rate also showed solid gains in employment.

“The economy is continuing to head in the right direction,” said Millan Mulraine, senior macro strategist at TD Securities in New York. “However, the ultimate test of the sustainability of the recovery is for the economy to create a sufficient number of jobs to sustain a consumer-led rebound in activity.”

“On this measure, this report falls short,” he said.Although the gain in the number of jobs created as measured by the survey of employers was relatively modest, it marked a pickup from October’s upwardly revised 100,000 increase.

In all, 72,000 more jobs were created in October and September than previously reported.

The retail sector accounted for more than a third all new private sector jobs in November as shops geared up for a busy holiday season, but average earnings fell two cents.

Data ranging from manufacturing to retail sales suggest the U.S. economy’s growth pace could top 3 percent in the fourth quarter, an acceleration from the third quarter. In contrast, much of the rest of the world is slowing and the euro zone appears to have already fallen into recession.

Stocks on Wall Street opened higher on both the employment report and growing optimism of a solution to the European debt crisis, while prices for U.S. government debt fell. The dollar was little changed against a basket of currencies.

The report could temper the appetite among some Federal Reserve officials to ease monetary policy further.

In forecasts released earlier this month, the Fed said the jobless rate would likely average 9 percent to 9.1 percent in the fourth quarter. It did not expect it to drop to an 8.5 percent to 8.7 percent range until late next year.

However, it is unlikely to take much pressure off President Barack Obama, whose economic stewardship will face the judgment of voters next November.

New jobless claims fall 10,000 for the second week in a row

WASHINGTON ― New U.S. claims for unemployment benefits declined for the second straight week, to the lowest level since the first week of April, the Labor Department said on Thursday.

Initial claims for state unemployment benefits fell 10,000 to a seasonally adjusted 390,000 in the week ended Nov. 5, slightly below the 400,000 that analysts polled by Reuters had expected. The government revised its estimate for claims during the prior week to 400,000 from 397,000.

Weekly claims still remain well above pre-recession levels and have only dipped below 400,000 — a threshold many economists believe signifies improving labor market conditions — 10 times over the past year.

A Labor Department official said a freak fall snowstorm that kept many people housebound in the Northeast did not affect initial jobless claims.

The number of people still receiving benefits under regular state programs after an initial week of aid fell 92,000 in the week ended October 29 to 3.615 million. That was the steepest drop since February, and the lowest level since the week ended Sept. 20, 2008.

The four-week moving average of claims, considered a better measure of labor market trends, fell to 400,000 from 405,250 the prior week, which was revised up from the previously reported 404,500.

Employment realities

Peter Munson, Managing Partner, Executive Career Services

Peter Munson, Managing Partner, Executive Career Services

As the U.S. economy continues to falter, unemployment has never been such an influencing factor since the Great Depression. Unemployment stands at between 12 percent and 15 percent, not the 9 percent you hear every day. That number is based on government statistics that come from people registering for unemployment. In reality, it is estimated that there are as many 25 million people who are currently unemployed.

The average monthly paycheck is $3,500. The average monthly unemployment check is $1,000. That means it costs the government as much as $50 billion each month in lost payroll taxes and paid unemployment benefits. The question then becomes, “How does the future look for job seekers, employers and the economy as a whole?” Also, “How does the HR and talent management industry react to the constantly changing landscape during these uncertain times?”

Many manufacturing jobs are simply gone forever. They are not coming back, either as a result of outsourcing overseas or because certain sectors have become obsolete or uneconomic from a production standpoint. Today, more than 50 percent of consumer goods — from semiconductors to washing machines — are manufactured outside of the U.S., and that trend continues to increase. At the same time, new industries are emerging, which are very much technology-driven but will take time to develop their full potential, especially as it relates to employment.

As a result, many companies are outsourcing their help desks and customer service activities to countries like India, which is having the effect of creating something of an unemployable labor pool in the U.S., due to a lack of job training and/or education.

So what this means is that for as far as the eye can see, we risk having a permanent unemployment rate of between 8 percent and 10 percent, compared to what was previously the norm of between 3 percent and 5 percent.

Looking to the future, the private sector of the U.S. economy is going to be far more dependent on service industries than manufacturing. Therefore, the human capital of industry must be re-educated and re-trained to meet this new criteria. Initially, it will be a painful transition that probably will get much worse before it gets better.

Human resource managers are now looking at significant changes in their hiring practices in an effort to reduce costs and improve efficiency. Due to the uncertain economic outlook, companies are relying more on temporary staffing than full-time employees. Fewer companies are outsourcing their search requirements and are scanning the job boards and going to social networks, such as LinkedIn, Twitter, Facebook and cloud computing to identify job applicants — from CEOs to entry-level trainees. This, in turn, has required talent management firms, such as ours, to essentially reinvent themselves.

No more brick-and-mortar office space. Outsourcing of consultants and virtual delivery has become the norm. And, many client companies have decided not to provide outplacement services when they plan a reduction in their work force.

The retained search business has also become a victim of these changes. Ancillary services, such as executive coaching and leadership development programs, have been put on hold by many employers indefinitely.

As a result, our company, ECS, has adopted something of a hybrid approach that incorporates a hi-tech/hi-touch delivery system, providing the best of both worlds to the candidate, including high-quality virtual programs as well as the more personal one-on-one consultation.

Today, the industry is becoming more sophisticated in the development of online career centers and interactive webinars. Consolidation has also begun to create economies of scale. All of the changes now allow candidates a choice to develop their job search from home by accessing the selected service providers’ website, as well as select online certified job training programs. This change has been slow in coming but is now more the rule that the exception. As such, more focus is being given to alternative careers relative to preferred training options and home office environments.

This will not be an overnight recovery. We anticipate unemployment will continue at between 8 percent and 10 percent well into 2012. Political uncertainty, along with tightening of bank credit, concern about higher taxes and the unknowns of health care reform, virtually guarantee it.

Most people in this country want to work and be successful. If we can combine this desire with a re-education program where we have round pegs in round holes, we really can “win the future.”

A viable solution is creating a task force composed of management, government, labor, educators and HR professionals. This group could begin the process of industrial renewal that will put us on a path toward rebuilding our labor pool into a more practical, sustainable level that will launch us into the 21st century and beyond.

In this land of opportunity, there is room for everyone to succeed in their own way.  That’s what makes America great.

Peter Munson is managing partner of Executive Career Services. Reach him at [email protected] or (310) 442-7734.

How will Ohio handle unemployment compensation?

Anthonio C. Fiore, Attorney, Kegler, Brown, Hill & Ritter

Spending on unemployment compensation is at an all-time high, jumping from approximately $31 billion in 2008 to $120 billion in 2009, $160 billion in 2010 and a projected $120 billion for 2011. Numerous states, including Ohio, have depleted their unemployment compensation trust funds and have had to borrow from the federal government.

“Ohio employers have seen modest increases in their state unemployment taxes over the last few years as automatic triggers kicked in to try to keep the fund solvent. However, the increases just haven’t been enough to stay ahead of the benefits paid out,” says Anthonio C. Fiore, an attorney with Kegler, Brown, Hill & Ritter.

Eventually, the federal government will look to Ohio employers to replenish their fund through higher contributions or taxes. To keep the costs to employers from growing ever higher, Fiore says the state and its employers must work to reform the unemployment compensation system in Ohio and get people re-employed.

Smart Business spoke with Fiore about the tasks at hand.

What is the status of Ohio’s unemployment compensation (UC) trust fund?

Employers pay into both the state and federal unemployment compensation trust funds. Solvency of the state’s UC trust fund had been a growing concern for a number of years, but it finally moved into the red in January 2009. Ohio currently owes the federal government over $2.6 billion for loans from the Federal Unemployment Account (FUA) — commonly referred to as Title XII loans.

How does the situation in Ohio compare to that in other states?

Ohio is in the same boat as many other states. The highest unemployment in nearly three decades is spread across the U.S. and very few counties and states have been immune. State unemployment taxes increased as a percent of total wages on average by 34 percent from 2009 to 2010 and are expected to increase even more for 2011 and 2012.

As of Sept. 1, 2011, 27 states and the Virgin Islands have outstanding federal loans of over $36 billion. The United States Department of Labor (USDOL) projects a peak in 2013 of up to 40 states and $65.2 billion in outstanding loans. Interest on loans is charged at the rate of just over 4 percent for 2011. Approximately $1.7 billion will need to be paid from sources other than the state unemployment insurance (UI) tax — employers in 19 states (not including Ohio) will pay a special assessment to cover this cost. The first interest payment from states is due September 30, 2011, and interest will continue to accrue as long as loans are outstanding.

State and federal unemployment taxes will continue to increase over the next three years and remain at higher rates for at least 10 years on average. Average UI taxes will more than double with some employers experiencing much higher tax increases as a percentage of total wages. Increased taxes will increase the cost of hiring. Increased duration of unemployment compensation will continue to be a disincentive to individuals deciding whether to actively seek and accept work available in the labor market. Relief from automatic Title XII interest and Federal Unemployment Tax Act (FUTA) offset credit penalties is possible only if states, businesses and workers push for them. States with no debt may be less supportive of relief, arguing that they have already addressed solvency and did not get relief.

How long will it take Ohio to get its fund solvent once again?

The goal is not simply to pay back the $2.6 billion to the federal government. The goal is to replenish the fund to what is called ‘minimum safe level’ in order for it to weather future economic downturns. The minimum safe level is around $2.5 billion; therefore the state UI fund is approximately $5 billion away from where it needs to be in the future. It could take three to five years to get the fund back to this level.

How can Ohio get the fund back to solvency?

Obviously, the best case scenario is finding a way to get more individuals employed, so fewer individuals are collecting unemployment. That would help Ohio rebuild the fund the fastest, versus raising employer taxes. In terms of direct costs to companies, businesses can work with third-party claims administrators and/or an attorney to more aggressively manage their claims to eradicate fraudulent claims and overpayments. The state itself is taking numerous proactive efforts and is focusing on ways to reform Ohio’s unemployment compensation system, keep businesses in Ohio, attract new companies to Ohio, and get Ohioans re-employed.

How will developments at the federal level impact Ohio?

Pending legislation (H.R. 1745, also known as the Jobs Act) would reform aspects of the unemployment system. Ohio would benefit from some of the reforms that are being advocated by a broad coalition of national and state business associations. One of these is a requirement that would strengthen job search requirements for those receiving unemployment. In addition, President Obama recently released the ‘American JOBS Act’ with several provisions affecting unemployment compensation. While some provisions of the proposal have merit there is still uncertainty surrounding what price tag will be levied on those who fully fund the system — employers. The current system was developed in the 1930s and was not set up for the situation the country is currently in. Reforms would focus on getting people re-employed faster and into the jobs that are available.

ANTHONIO C. FIORE is an attorney with Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5428 or [email protected]

Jobless claims fall but not enough to dispel worries about economy

WASHINGTON ― Americans filed fewer new claims for jobless benefits last week, but the decline was not enough to dispel worries the economy was dangerously close to falling into a new recession.

Applications for unemployment benefits dropped to 423,000 in the week ending September17 from an upwardly revised 432,000 the prior week, the Labor Department said on Thursday.

Analysts polled by Reuters had expected claims to fall last week to 420,000.

With fears mounting in the country that a new recession is at the door, the Federal Reserve on Wednesday warned of “significant” risks to the economy as it launched a new plan to boost growth through cheaper borrowing costs.

“(The data) suggests that job growth this month is probably not going to be stellar,” said Rudy Narvas, and economist at Societe Generale in New York.

“It gives more backing to the Fed’s decision yesterday to provide more stimulation. The economy is chugging along near stall speed.”

Recession fears are growing around the world. Data in Europe and China on Thursday showed private sector business activity declined sharply this month as the euro zone debt crisis and a stalling U.S. recovery hit confidence.

The Fed’s warning and the weak data in Europe and China hammered global stock prices. U.S. stock futures tumbled early Thursday on worriers about the global economy.

The four-week moving average of claims, which smoothes out volatility, rose to 421,000 from 420,500 the prior week.

Excluding one week in early August, claims have held above 400,000 since early April. A Labor Department official said there was no discernible effect from Hurricane Irene or other recent storms in the national reading.

Continuing claims eased to 3.727 million in the week ending September 10 from 3.755 million the previous week. The data showed that in the week ending September 3, the number of total recipients on benefit rolls was 6.889 million.

New jobless claims rise, July trade gap narrows to $44.8 billion

WASHINGTON ― The number of Americans filing new claims for jobless benefits rose unexpectedly last week, further evidence of a weak labor market just hours before President Barack Obama unveils a plan on job creation in a major address to Congress.

A separate report showed a considerably narrower trade deficit for July, a positive signal for growth in the third quarter after a sluggish first half of the year.

Applications for unemployment benefits rose to 414,000 in the week ending September 3 from an upwardly revised 412,000 the prior week, the Labor Department said on Thursday. Wall Street analysts had been looking for a dip to 405,000.

“Jobless claims numbers have been stabilizing in recent weeks. We’re probably seeing an economy that’s just growing slowly,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis.

U.S. stock index futures extended losses after the data, while Treasury debt prices held gains.

Excluding one week in early August, claims have held above 400,000 since early April. The Labor Department said there was no discernible effect from recent hurricanes and storms on the national figures this week.

The four-week moving average of claims, which smooths out volatility, rose to 414,750 from 411,000 the prior week.

Continuing claims eased to 3.72 million from 3.75 million in the week ended Aug. 27, the latest available data. The number of total recipients on benefit rolls was 7.17 million in the Aug. 20 week.

U.S. employment growth ground to a halt in August, with zero net job creation raising fears of a new recession and putting pressure on the Federal Reserve to ease monetary policy further at its meeting later this month.

But in a respite from the negative news, the trade gap shrank to $44.8 billion in July, Commerce Department data showed, down sharply from June’s $53.1 billion deficit and much lower than forecasts around $51 billion.

The 13.1 percent decline was the biggest month-to-month percentage drop in the deficit since February 2009.

Fed’s Pianalto: it will take years to lower unemployment

COLUMBUS, Ohio ― The economy is growing so slowly that it will take years to wrench lofty unemployment rates back to normal levels, Cleveland Federal Reserve Bank President Sandra Pianalto said Friday.

Speaking to a community bankers’ group, she said growth in 2011 was likely to be about 2 percent and forecast it will rise only to 3 percent in 2012 and 2013 ― unlikely to make much of a dent in the current 9.1 percent jobless rate.

“If we’re going to dig ourselves out of the hole that we’re in and begin to drive down the unemployment rate, we need even faster growth than that,” she said in Columbus, Ohio.

“I think it will take quite a few years for the unemployment rate to fall to more typical levels, in the neighborhood of 5-1/2 percent,” she added.

Pianalto noted that central bank policymakers, in deciding to keep official interest rates near zero until mid-2013 at their last policy session, had concluded that recovery will be slower than expected in coming quarters and that downside risks were on the rise.

Not only are incomes growing slowly in a harsh job climate, but consumer confidence is weak and other key economic sectors are in trouble.

“The housing sector remains very depressed,” Pianalto said. “Home prices are still under pressure, inventories of existing homes are still very high, and foreclosures continue to be a serious national problem.”

On a more positive note, Pianalto said that she thought a spike in food and energy prices this year will abate.

“I see the inflation rate stepping down from its current level over the rest of this year and into next year as well,” she said, likely to an average of two percent “or a bit less” in 2012 and 2013.