Jobless Claims On The Rise — Does America Need To Worry About Ailing Economy?

By Roemart Tamayo | Oct 30, 2015 06:15 AM EDT

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Jobless claims are rising, but should America worry?

The answer to that is NO because even though it slightly increased, the number of unemployment remains at historically low levels.

According to a report by CNBC, the number of Americans filing new applications for unemployment benefit rose significantly and the underlying trend continued to point to a fairly healthy labor market.

As for the prior week's claims, they were unrevised. It was the 34th straight week that claims were below the 300,000 threshold which is normally due to a fairly healthy jobs market.

Initial claims for state unemployment benefits increased by 1,000 to a seasonally adjusted 260,000 for the week, according to the Department of Labor and Employment. This downtrend on jobless claims is also the most since the year 1973.

As explained by Market Watch, new claims are registered when a person loses a job and applies for unemployment benefits. Weekly claims settled below the key 300,000 benchmark almost seven months ago and have fallen to levels last seen in the early 1970s when the working age was much younger.

The very low level of layoffs suggests that the labor market remains in good shape, despite a recent sharp slowdown in job growth. The Federal Reserve also noted that the pace of job gains had slowed down, but said "underutilization of labor resources has diminished since early this year."

Since 2009, claims have been trending downward and recently hovered near a four-decade low. What does that mean? It means that employers are now more reluctant to lay off workers, a sign that the labor market is getting tighter.

In a related note by the Wall Street Journal, fewer layoffs typically means hiring is picking up. But job gains have slowed down in recent months, reaching 142,000 in September and 136,000 in August. Those numbers are well off the pace of around 230,000 new jobs a month on average over the past year.

And although companies cut back on hiring toward the end of summer, they still have plenty of open jobs and most see little to no reason to reduce employment. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that payrolls should be running even higher at around 250,000 a month.

In conclusion, the U.S economy is still growing, albeit in a moderate pace and with households leading the way. Furthermore, consumer spending also rose to a healthy 3.2 percent annual clip in the third quarter, after a 3.6 percent gain in the sprint.

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