Today’s jobless claims update looks troubling. It’s premature to make definitive claims about what comes next, but the number du jour doesn’t make it easier to maintain the rosy glow that’s defined the macro outlook of late. Here’s the problem: Last week’s sharp rise in new filings for unemployment benefits is the third increase in a row, and the biggest of the three. As a result, claims have jumped to the highest levels since last November, when the blowback from Hurricane Sandy had temporarily elevated new filings. But you can’t blame the weather this time. It’s unclear if the rise in recent weeks is noise, albeit in somewhat more extreme form from what we’ve seen lately, or the start of something darker for the business cycle. But for now, the outlook looks a bit cloudier in the wake of this morning’s update.
Claims jumped 28,000 to a seasonally adjusted 385,000 last week on a seasonally adjusted basis. That’s the second-biggest weekly increase this year and the total claims number is now at the highest in four months.
The year-over-year trend doesn’t look encouraging either. Unadjusted claims data was virtually unchanged last week vs. the year-earlier level, but the path of late isn’t helpful. As you can from the chart below, the annual pace has been flirting with the danger zone of zero and above in recent months and it appears as though the numbers may run north of neutral again. If so, that would be a dark sign, particularly if it runs on for any length of time.
But let’s not throw in the towel just yet. The standard caveat applies whenever we’re analyzing this data series, particularly if we’re speculating that we may be on the cusp of a turning point. In short, jobless claims are a volatile lot on a week-to-week basis and history reminds that these numbers dispense a large number of false warnings if you’re just looking at a few data points.
Eventually, the truth will out and deeper context will arise as the March economic profile unfolds in the days and weeks ahead. As for claims, if they continue to rise, and the year-over-year changes move above zero, week after week, the case for optimism for the labor market will suffer. But we’re not there yet.
But with yesterday’s weaker-than-expected rise in private payrolls for March by ADP’s reckoning, combined with today’s discouraging jobless claims number, it’s suddenly a bit tougher to think positively about tomorrow’s employment report from the Labor Department.