Today’s update on weekly jobless claims is encouraging, but no one should confuse last week’s sizable decline in new filings for unemployment benefits with the all-clear signal for the economy. There are still too many risk factors bubbling to convince us that full-bore optimism is now the sentiment of choice.
The Labor Department reported that jobless claims fell to 348,000 for the week through February 9, down from a revised 357,000 the week before. That’s a handsome tumble, but as our chart below reminds the broader picture (as indicated by the black line, which graphs the linear trend) still doesn’t look encouraging.
Weekly jobless claims are, of course, a volatile series in the short run. Extreme weather conditions, for instance, can arbitrarily reverse long-run trends in any given week. But if we step back and consider the big picture, it’s hard to dismiss the rise in initial jobless claims as anomalous and unrelated to economic conditions of late. Indeed, it’s because we know of the pain unfolding in the wider economy that we see the growing jobless claims trend for what it is: a warning sign.