March 8, 2012
Jobless Claims Rose Again Last Week
New jobless claims jumped 8,000 last week to a seasonally adjusted 362,000, the Labor Department reports. That's the third weekly increase in a row and the biggest weekly gain since late-January. In addition, the four-week moving claims average inched higher for the first time in two months. Are those reasons to worry? Well, yes. You (still) can't take anything for granted in macro these days, least of all the idea that a recovery is destiny. Having said that, now's a good time to roll out the standard caveat that weekly claims are a volatile series and to the extent that we can draw any conclusions here it arises from the trend. On that front, fortunately, the news is still encouraging.
As the chart below shows, new claims have been trending down for nearly a year. This is a robust signal that job growth will continue. So far, so good. The drop in new claims is interrupted at times by temporary pops, and now may very well be one of those times. But in the last leg down, which began last spring, the high points have been lower and (more importantly) so have the lows. I'll be the first to point out if the trend appears to be in mortal danger, in which case the outlook for the labor market would be negatively impacted (and so too would the prospects for continued economic growth). Indeed, the strongest case for remaining optimistic on the macro view is bound up closely with job growth these days. Without this factor on our side, the cycle is far more likely to succumb to the dark forces. But thinking in those terms is still premature, at least according to the numbers in today's claims update.
It's clear from the above chart that new claims have been zig-zagging lower. Although the recent numbers aren't helpful, the uptick is (still) marginal and well short of refuting any prediction that the downdraft is over. We can find some confirmation by looking at the raw year-over-year claims data, which continues to indicate declines in line with recent history.
Yesterday's update of ADP's estimate of private payrolls for February also suggests that the moderately virtuous cycle of job growth rolls on. If tomorrow's payrolls report from the Labor Department delivers an equally robust review, it'll be easier to think that the healing process will continue.
"The downtrend in claims, even with this modest uptick this week, is being sustained," Eric Green, chief market economist at TD Securities, tells Bloomberg. “This is consistent with a much better labor market. The shift higher in job activity looks to be in tact.”
Nick Bennenbroek, who oversees currency strategy at Wells Fargo in New York, tells Reuters: "We remain in this lower range as far as the jobless claims are concerned and most analysts are looking forward to at least a moderately encouraging payrolls report tomorrow."
I'm still worried about the slowdown in personal income and spending growth, but a decent number in tomorrow's payrolls report will help raise the odds that the economy can move forward. But as Bloomberg's consensus forecast suggests, expectations are somewhat muted: Private payrolls are expected to rise by 220,000 for February, down from 257,000 the month before. That wouldn't be terrible, but it wouldn't be a game changer either.
For the moment, it seems that more of the same is a reasonable view. That's been enough to bring us this far, but with energy prices creeping higher and geopolitical risk via Iran still lurking, the margin for error may be shrinking. In other words, we need a surprisingly strong jobs report tomorrow to keep a lid on worries. Stay tuned....
Posted by jp at March 8, 2012 9:23 AM