Applications for jobless benefits rise to 462K

[The Northerner]

WASHINGTON – More people applied for unemployment benefits last week, the first rise in three weeks and evidence that companies are reluctant to hire in a slow economy.

Initial claims for unemployment aid rose by 13,000 to a seasonally adjusted 462,000, the Labor Department said on Thursday. It was only the second rise in two months.

Jobless claims have been stuck near 450,000 all year. Few employers see much reason to create many jobs, and some are still laying off workers. Rail operator CSX Corp., for example, said on Wednesday that it can lengthen its trains to handle rising shipments, reducing its need to hire more employees.

"The labor market is kind of frozen right now," said Zach Pandl, an economist at Nomura Securities. "There's not a lot of hiring going on, not a lot of quitting, not a lot of layoffs."

A separate report from the Commerce Department showed the trade deficit widened in August by 8.8 percent to $46.3 billion. The gap grew because of a 2.1 jump in imports, driven by demand for foreign-made semiconductors, generators and other types of industrial machinery. Exports edged up a slight 0.2 percent.

A third report noted that prices at the wholesale level remained tame outside a sharp rise in food and energy costs. Excluding those two volatile categories, core wholesale prices rose just 0.1 percent, the Labor Department said.

Read more: http://news.yahoo.com/s/ap/20101014/ap_on_bi_go_ec_fi/us_economy

[taught_me_patience]

1. This is quite a dismal report

The recovery appears to be stalling at a critical jucture. I believe that if we could push through these tough months, we could will see an explosion in hiring, starting in Jan.

If republicans gain power and follow through on cutting spending, we could see a double dip recession next year (probably their goal).

[BrklynLiberal]

2. The Idea That Won the Nobel Prize in Economics

http://www.theatlantic.com/business/archive/2010/10/the-idea-that-won-the-nobel-prize-in-economics/64394/

<snip>
The Nobel award went to economists who looked for more sophisticated ways to explain the search friction phenomenon:

In the late 1970s, Professors Diamond, Mortensen and Pissarides all turned to the public policy implications of search models. In a 1977 article "Unemployment Insurance and Job Search Decisions," Professor Mortensen examined the implication of unemployment benefits for unemployment rates. He concluded that the effects were more ambiguous than previously thought, because workers who aren't currently receiving unemployment insurance benefits will be more likely to take on a low-wage, risky job if they know they can get unemployment insurance if the job doesn't work out.

The core of Professor Diamond's work on search models appeared in a three-year window between 1979 and 1982. His work was distinguished both by elegant modeling -- building the theoretical tools needed to make sense of labor turnover--and important insights. Perhaps the key idea is the "search externality," the idea that each "additional worker makes it easier for vacancies to find workers and harder for other workers to find jobs." In a sense, a flood of unemployed workers can congest the labor market just as a flood of extra drivers can congest a highway. Whenever one worker passes up a job, that worker makes finding a job easier for other workers. This insight led to Professor Diamond's conclusion that higher levels of unemployment insurance could improve the workings of the labor market by making some workers pass up marginal jobs.

http://curiouscapitalist.blogs.time.com/2010/10/11/what-todays-nobel-says-about-the-us-unemployment-crisis/

What Today's Nobel Says About the US Unemployment Crisis

<snip>
Democrats think we are not doing enough. Jobs create jobs. Meaning once one person has a pay check, they will spend money, creating a need for other companies to hire. So they believe the government should step in and create those first jobs to get the economy rolling again.

Where do the Nobel prize economists side on that debate? They would side more with the Democrats on this one, though not exactly. It seems clear that the three economists think we need to be doing more to help the unemployed. But just creating new jobs may not be the answer. They would argue, I think, we need to attack the problems that cause joblessness and not just create new jobs. Peter Diamond has argued that unemployment insurance is good and brings down long-term unemployment. It gives job searchers the time they need to find a job that they are happy with and can commit to. Rather than take a job that they think is beneath them just to quit and find a new job when the market gets better. So I don't think Diamond would argue to cut unemployment benefits. Perhaps this is why Republicans have blocked his nomination.

Cowen, who is generally conservative, cheers the inclusion of Pissarides as the one of the three economists winning today who is less "Keynasian," meaning he would be less for a New Deal type of approach to government spending to create jobs. But even Pissarides would like to see governments do more job training and other efforts that help young people find work. And it seems like we need programs like that more than ever in the US. Teenagers have had a particularly hard time finding work in this recession. And many economists have argued that's not a trivial matter. What's more, one of the programs that Pissarides supports is in part named after the "New Deal":
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