December 27, 2012
A Surprisingly Positive Final 2012 Update On Jobless Claims
Jobless claims posted a surprisingly robust decline last week vs. expectations. Today’s update offers more evidence for thinking that the labor market continues to expand and will continue to do so in early 2013, and perhaps with more upward momentum than generally recognized. It all adds up to an encouraging bit of news for thinking positively for jobs growth in early 2013. The fiscal cliff nonsense may throw a wrench into the macro machine, but the final number on the labor market released in 2012 suggests that the case for optimism is very much alive and kicking via the data.
Claims are again trending down, with last week’s figure (along with the four-week average) hovering just over the five-year low set back in early October of this year. New filings for jobless benefits dipped 12,000 last week to a seasonally adjusted 350,000. With only a few exceptions, claims have never been so low since the Great Recession ended in June 2009. This alone is no magic bullet for macro, but it surely speaks rather forcefully about where the labor market seems to be headed.
Far more impressive (and substantially more significant in terms of looking ahead) is the sharp drop in the year-over-year comparison before seasonal adjustments to the data. Unadjusted claims fell more than 11% last week vs. the same period from a year earlier. This is a powerful message that the pre-hurricane trend of progress (i.e., falling claims) is intact. It’s also a strong signal for expecting continued growth in payrolls in the near term.
Even better, today’s claims report is part of a broader narrative of continued improvement in the economic updates. Whether it’s my nowcasts of fourth-quarter GDP, analyzing the broad macro trend across an array of indicators (here and here), or looking at the numbers individually (here, for instance), the theme has more or less favored growth. Modest growth, but growth nonetheless. The first rule of economic analysis is that when a broad cross section of data are speaking with one voice, it's usually a good idea to recognize that the trend is telling you something of value.
I’m amazed that so many analysts have argued otherwise. The constant warnings from some folks, month after month after month, that the US economy is shrinking (or is about to start contracting any day now) have been consistently wrong and, as far as I can see, based largely on speculation about the future rather than examining the hard data as it’s published. Granted, we only have numbers through November at this point, but unless December drives over the edge in fairly dramatic fashion, we’re on track to escape 2012 on a relatively upbeat note in terms of growth.
The future, of course, is always uncertain, but it would take an unusually large shock at this point to derail the expansion that’s clearly (still) underway. Recessions don't usually drop out of the sky without warning, and so far the warnings remain minimal in terms of expecting the worst.
The December numbers start arriving next week and so we’ll have some early clues on how the final month of the year is shaping up. I’ll also have revisions to my various business cycle indicators early in the new year for additional perspective. For now, it’s still hard to make the case that a new recession is imminent, or that one has recently started. Such talk makes for entertaining interviews with the usual suspects, but a sober, careful analysis of the economy from multiple perspectives still implies that there's forward momentum afoot.
The available numbers across a broad spectrum of the economy and the financial and commodity markets, in the aggregate, simply aren’t dark enough at this point to argue that recession risk is high. That’s been a relatively stable message all along, and it remains clear today. Never say never, but the data to date suggests that 2012 will go into the history books as another recession-free year. Today's jobless claims news certainly puts us one data point closer to confirming that outlook.
Posted by jp at December 27, 2012 9:36 AM