Spoiler: We’re better than we were two weeks ago, but it’s never enough. This week’s Unemployment Insurance Weekly Claims Report has been released. Initial claims fell to 521,000. This solidly beat the Bloomberg estimates (540K to 556K). Last week’s number was revised up 3,000 to 554K. From the report:

In the week ending Oct. 3, the advance figure for seasonally adjusted initial claims was 521,000, a decrease of 33,000 from the previous week’s revised figure of 554,000. The 4-week moving average was 539,750, a decrease of 9,000 from the previous week’s revised average of 548,750.

The advance seasonally adjusted insured unemployment rate was 4.5 percent for the week ending Sept. 26, a decrease of 0.1 percentage point from the prior week’s unrevised rate of 4.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Sept. 26 was 6,040,000, a decrease of 72,000 from the preceding week’s revised level of 6,112,000. The 4-week moving average was 6,144,250, a decrease of 15,750 from the preceding week’s revised average of 6,160,000.

This puts us back on the stabilization path. Again, no celebration before we drop below the 500K mark. With the upcoming revisions to the employment situation reports, I’m willing to lower that to 400K. From last Friday’s Employment Situation Report:

Each year, the Current Employment Statistics (CES) survey employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insur- ance tax records that nearly all employers are required to file. For national CES employment series, the annual benchmark revisions over the last 10 years have averaged plus or minus two-tenths of one percent of total nonfarm employment. The preliminary estimate of the benchmark revision indicates a downward adjustment to March 2009 total nonfarm employment of 824,000 (0.6 percent).

Saying that it is a 60 basis point revision is one way of looking at it. Saying that the job loss numbers needed to be revised 15% is another way of looking at it. Either way, the report was bad. Remember, as a rule of thumb, we need to add 200K jobs a month just to break even. Yes, this ignores the “people are leaving the workforce” bit in favor of the “population of working age is increasing.” To make the recovery to full employment—which we will now call 5% unemployment just to keep expectations reasonable—in the next five years, we need to add double that.

To make matters worse, the duration of unemployment is at an all-time high, and the average workweek is at an all-time low. There’s a lot of slack in the economy. The next driver of growth must be as big and revolutionary as the internet. Hopefully the retraining costs are low. Somehow people need to move from construction and manufacturing to this new industry (not so bad if the new industry involves building stuff). I’m still not sure how those laid off from the retail industry fit into any growth story. Five years is a long time, though. And fortunately, after those five years to return to full employment, the demographics shifts. We’ll have more people exiting the workforce for the greener pasture that is social security plus the average $200 a month that can be expected from the average 401(k). You read that right, $200 a month for 20 years, assuming someone even has a 401(k). It’s possible that some people might have to defer retirement.

I hope I just made the case that the celebration on stabilizing new claims shouldn’t begin until the number drops to at least 500K (and possibly 400K).

For those that care about actual people and the strain on state resources, I present the unadjusted data. Absolutely no good news there:

The advance number of actual initial claims under state programs, unadjusted, totaled 449,375 in the week ending Oct. 3, an increase of 3,757 from the previous week. There were 426,789 initial claims in the comparable week in 2008.

The advance unadjusted insured unemployment rate was 3.8 percent during the week ending Sept. 26, unchanged from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 4,994,971, a decrease of 77,884 from the preceding week. A year earlier, the rate was 2.3 percent and the volume was 3,057,698.

The number is moving in the wrong direction.

There might be some good news coming out of the good / bad lists.

The good list (-1000 or more): NY, NC, SC

The bad list (+1000 or more): TN, MO, IL, OH, CA

CA (the worst) was +4,467 vs NY (the best) at -2,253. At least volatility is down. The numbers aren’t great. That was to be expected from last week’s report. No trends stand out in the comments section, but North Carolina seems to imply that everything was getting better there:

Fewer layoffs in the textile, furniture, electrical equipment, electronic equipment, fabricated metals, chemical, transportation, warehousing, and manufacturing industries.

That sounds better than the ISM report. Is restocking truly underway?

I apologize if I painted too negative a picture this week. I missed the opportunity to comment on Friday’s terrible monthly employment situation report due to travel and I now have a gnarly head cold. I think my mood is justified by the statistics. Nearly a million jobs have disappeared that were previously unaccounted for, and the duration of the problem is rapidly becoming more important than the depth (and that’s not so great either). I am hoping that the GDP report will bring some good news. We need to see an uptick in manufacturing, construction, and retail. Otherwise, the trend in net job losses will continue. That translates to a shrinking middle class.

Finally, where are the unemployment benefit extensions? If they aren’t passed before the holiday season, expect a New Year’s unemployment bloodbath.