Jobless claims are very low, what's lacking is new hiring

The number of first-time claims for unemployment has been artificially depressed in recent weeks due to computer system overhauls in two states, but the trend in claims has not likely changed: it's down, and the level of claims is about as low as it's ever been (first chart above). Meanwhile, the number of people receiving unemployment insurance has rarely been so small. The labor market may be plagued by a dearth of new positions, but it is certainly not plagued by too many layoffs. Indeed, today the chances of a worker being laid off are about as low as they have ever been (second chart above).

The number of people who continue to receive unemployment insurance has not been materially affected by computer problems, and that too continues to decline. In the past year, the number has shrunk by 22%, or 1.12 million, and it is getting very close to pre-recession levels. In this aspect of the workforce, the economy has managed to stage an almost-complete recovery.

Very few observers pay much attention to the so-called Leading Economic Indicators, but the truth is that they haven't done such a bad job. They may not be very leading, but they have consistently turned down during every recession and risen during every growth cycle. As of August, they were up over 4% from a year ago, and that is consistent with a growing economy and very little chance of recession.

The chart above shows the level of the index, and I have highlighted how similar the past 13 years have been to the period from 1965 to 1982, during which time the stock market suffered from miserable  performance, falling 62% in real terms (see chart below). It's been a miserable recovery this time around, but the stock market is in much better shape, perhaps because we have not had a big problem with inflation like we did back in the 1970s.

All in all, it looks like economic conditions are gradually improving. All that's needed to convert this miserable recovery into a robust recovery are more "animal spirits." Businesses need to regain more confidence (so that they are more willing to invest in new plant and equipment and hire more workers), and a good way to help businesses regain confidence would be for regulatory and tax burdens to be lightened, and for monetary policy to become more rules-based.