If the Jobs Recovery Is ‘Real,’ Why Are Economic Fears Lingering?

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Source: Mark Ralston, AFP/ Getty Images

The recovery from the 2008 financial crisis and subsequent recession has lasted five full years, but even amid news that the U.S. economy grew a better-than-expected 4.2 percent in the second quarter and emerging unemployment remains well within comfortable bounds, the story of growth is much more complex than it appears at the surface. Thanks to wage stagnation and the concentration of employment gains in low-wage jobs, many Americans are still facing financial difficulties. A new survey conducted by Rutgers University found that two of every three Americans felt no improvement in their economic circumstances in the past year, while only approximately one in four expect their personal finances to strengthen in the coming year. And Gallup’s Economic Confidence Index tells the same story; while readings have been generally stable, suggesting November’s congressional midterm elections have pulled the nation’s focus to politics, it is important to remember that Americans are no more confident about the country’s near-term economic health than they were are a year ago. And views are still sharply negative.

The labor market is far from completely healed, even though it is now healthier than at any point in the past five years. The steady decline of emerging unemployment is the most obvious manifestation of that reality. Jobless claims — which serve as a proxy for layoffs — highlight the fact that emerging unemployment is returning to acceptable levels. Or, in other words, fewer Americans are being laid off, even if long-term unemployment remains elevated and the labor force participation rate stands near record lows — the dual concerns of Federal Reserve Chair Janet Yellen. The jobless claims report released Thursday by the Department of Labor’s Bureau of Labor Statistics showed that 1,000 fewer Americans filed initial applications for unemployment benefits in the seven-day period ended August 23, bringing total weekly claims down to 298,000. At that level — a nearly eight-year low — jobless claims are just below the important benchmark level of 300,000, which indicates stability in the labor market. By comparison, at this time last year, new applications stood at 336,000.

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When jobless claims fall below 400,000 per week, economists consider the Labor Department’s report to be evidence of an improving labor market, and weekly claim numbers lower than 350,000 indicate moderate job creation. Of course, there is little value in placing too much significance on any one jobless claims report. But the underlying trends are strong as well; claims have fallen below 330,000 in 22 of the past 25 weeks and below 300,000 in four of the last six weeks.