Initial Claims at Lowest Rate Since January as Auto Plants Restart

The rate of new claims for jobless benefits fell to the lowest level since January, and a close look at the pattern of layoffs in the automotive industry provided additional good news for auto workers.

The government said that initial claims fell by 52,000 -- a drop significantly more than any economists had expected. In addition, the new claims data appears to have been significantly effected by positive circumstances in the auto industry.

A Labor Department official said there had been far fewer automotive and other manufacturing layoffs last week than anticipated. Historically in July many auto plants are commonly idled. This year however many of those same plants sat idle earlier in the year as automakers entered bankruptcy and restructuring plans. Those plants are just now coming back on-line.

For instance, after emerging from bankruptcy protection and finalizing a deal with the Fiat Group, Chrysler resumed production of vehicles at seven assembly plants in the US, Canada, and Mexico the week of June 29. And GM attorneys are expected to lead the new General Motors (GMGMQ.PK) out of bankruptcy protection on Friday with associated factory production restarts to follow shortly.

As the 2009 recovery gets underway, these auto plant restarts will no doubt lead to renewed optimism for US auto workers and further boost rebounding factory production.

Comments

[Steven Hansen:]

you did notice the difference between SA and NSA numbers (one worsened and the other strengthened)? the SA numbers which were better than last week anticipated summer auto plant shutdowns (the plants were already shutdown).

the NSA numbers were worse then last week - no punter has put forth an reason for this.

add to this that the data was for the shortened july 4th week. in my experience, shortened workweeks yield suspect data.

further, the seasonally adjusted unemployment insurance rate increased this week from 5.0 to 5.1% - not something that would happen if conditions were getting significantly better.

no question initial unemployment insurance rates are trending down. but i see nothing in this data to crow about.

Jul 10 06:32 AM

[conceptwizard:]

We should all be eternally grateful. We get a 50,000 drop in employment numbers for the mere cost of over 700 billion dollars. What happens when the Government stops the stimulus and the Fed has already stated that it wont monetize the debt.
This rally and job numbers and everything else for that matter was purchased by the taxpayer. Just what lead us into this mess to begin with, purchases from people and Governments sending money we dont have, on things we cant afford. There will be no or very limited recovery without housing and the consumer in the US, and because we represent 30% of world GDP that will bode the same for the rest of the world. I wish we would get of head out our our .... and create some long term nanufactiring jobs and invest in the people and businesses instead of the banks. They are not lending money back because of huge losses and recapitization. This was the absolute wrong way to go, and I believe will be the hard lesson learned here. Invest in the good people.business of America we can turn things around if given the reins to do so. Instead these plugheads have sold us out.

Jul 10 07:32 AM

[BeachRider:]

There is also the issue of 'the new GM'. Doomsayers prophesized that GM would not emerge from bankruptcy until 2010 or 2011. GM should be out today.
Some Doomsayers advised the GM would forever be government-owned, too. We need to see GM's 61% government-stake reprivatized over the next 6-24 months to dispel that rumor, as well.
Honest to goodness, some folks admit that they wish the worst in this recovery, we all need to cause the best result (instead)!

Jul 10 07:52 AM

[The Good Ne...:]

Good Day Steve!

Yes, certainly there has been much speculation about NSA and SA numbers in the data. Many have simply said "ignore the data" for the next several weeks. As you point out though the first piece of good news is that regardless of SA / NSA anomalies, claim rates are now trending down. My second point here is that it is highly likely that those anomalies are caused by the govt models being screwed up by significant changes to this year's factory closures at non-seasonal times. The good news there is that bk proceedings have moved very swiftly and factories that had been closed at Chrysler and GM will now be (or are) coming back on-line quickly (again non-seasonally).

For those who choose to dismiss the next several weeks of jobs data because the factory restarts are screwing the models, I would simply posit that they should have also ignored the data when the car factories went off-line earlier in the year.

Hope all is well with you!

GNE

Jul 10 11:30 AM