Jobless Claims: Down But Still Rangebound

Jobless claims fell last week, retreating 20,000 to a seasonally adjusted 331,000. The drop was large enough to push the crucial year-over-year change down to an 8.3% decline from the year-ago level. But new claims are still wandering in a range: roughly 300,000 to 350,000 so far this year. Is unusually cold temperatures and a harsh winter in some parts of the US to blame for the relatively sluggish performance of late? That’s a possibility, although we’ll know for sure in the coming weeks if that’s a viable explanation as more data is published. Meantime, today’s claims release offers a bit of mild encouragement in the sense that new filings for unemployment benefits aren’t consistently trending higher. But there’s no downside momentum either and so the jury’s still out on what it all means.

What is clear is that we’ve seen a big fade on the downward slope in claims. The healthy decline in the first half of 2013 has lost its mojo in recent months. The good news is that it’s unclear if this is a signal that the labor market’s in trouble or just a new installment of the winter doldrums.

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“When you look at the labor market, job destruction has been very, very low,” says Scott Brown, chief economist at Raymond James & Associates. “It’s really been an issue of new hiring. That hiring, we think, is gradually picking up.”

Tomorrow’s payrolls report for January from the Labor Department will put Brown’s theory to the test. Yesterday’s estimate for January jobs from ADP suggests keeping expectations moderate. Private-sector employment increased by 175,000 last month, according to ADP. That’s “in line with the average monthly growth through 2013,” observes Carlos Rodriguez, ADP’s president and CEO.

Private payrolls via the government’s calculations increased by a monthly average of 184,000 in 2013. Perhaps, then, it’s no surprise that the consensus forecast calls for something similar in tomorrow’s update: a rise of 182,000 for private payrolls, according to Econoday.com. Average isn’t exciting, but if the estimate holds it’ll look quite good in comparison with November’s tepid gain of 87,000, as previously reported by Washington’s number crunchers.

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