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Deutsche Bank's LaVorgna: Jobless Benefit Cutoff Could Trim Unemployment Rate

By    |   Friday, 27 December 2013 08:16 AM

The Dec. 31 end of extended unemployment benefits for 1.3 million Americans could actually reduce the unemployment rate, says Joe LaVorgna, chief U.S. economist at Deutsche Bank.

The rate stood at a five-year low of 7 percent as of November.

"If extended benefits expire, the unemployment rate could abruptly fall based on data the BLS [Bureau of Labor Statistics] provides on the behavior of the long-term unemployed," LaVorgna wrote in a commentary obtained by CNBC.

Editor’s Note:
5 Phases of a ‘Retirement Heist’ Exposed (See Video)

BLS data indicate that 23 percent of the 1.3 million people who would lose their jobless benefits would exit the labor force, lowering unemployment by 0.2 percentage point, LaVorgna calculated.

Another 850,000 would drop off extended state unemployment benefits in the first quarter, lessening unemployment by another 0.1 percentage point, using the same formula, he noted.

That would put unemployment at 6.7 percent.

"This does not even account for the ongoing improvement in the labor market," LaVorgna stated.

The economy added 203,000 jobs in November.

"Large job gains akin to what we have witnessed recently would push the unemployment rate even lower," he said.

It's also possible that some of the people losing their jobless benefits would find a job.

On Thursday, the government reported that jobless claims fell 42,000 to a total of 338,000 in the week ended Dec. 21. "Companies have been holding on to workers and are now a getting a bit more active on hiring," Omair Sharif, an economist at RBS Securities, told Bloomberg.

Editor’s Note: 5 Phases of a ‘Retirement Heist’ Exposed (See Video)

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The Dec. 31 end of extended unemployment benefits for 1.3 million Americans could actually reduce the unemployment rate, says Joe LaVorgna, chief U.S. economist at Deutsche Bank.
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2013-16-27
Friday, 27 December 2013 08:16 AM
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