Diane Swonk, Chief Economist
Dec. 10, 2009 – 7:45 a.m. CT
Two Steps Forward, One Step Back
Unemployment claims jumped more than expected to 474,000 after a larger-than-expected DROP in the previous week. Continuing claims also dropped, but emergency claims increased.
On net, the labor market is still weak, but not weakening as rapidly as it was earlier in the year and, "hopefully," close to a turning point.
Separately, exports surged and the trade balance narrowed in October, which will add more to the accounting of real GDP than jobs, at least initially (much of the increase in exports is being met via an increase in productivity rather than with new hires).
Finally, a few comments on TARP: I fear that any marginal benefit that we may gain by seizing the remaining and repaid TARP funds for stimulus may be at too high of a cost in terms of risk to the deficit and perceptions of our credit worthiness as a country. The TARP was designed to sunset for a reason – to limit the moral hazard associated with bailouts and reassure investors that it would be a one-time phenomenon.
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