Last week we pondered the possibility that an ill wind was blowing in what had been a fairly consistent decline in initial jobless claims. Today’s update on new filings for jobless benefits doesn’t offering a soothing follow-up. If anything, we’re more anxious.

Initial claims rose last week to 480,000, the highest since mid-December. Now before we go off the deep end, let’s recognize that rising jobless claims in January and February is hardly unprecedented. Meanwhile, the general decline in this data series still looks intact and one can argue that the recent rise in claims is still within the bounds of statistical noise. But let’s also recognize we’re bumping up against the thin line of statistical noise vs. a turn for the worse in the generally improving trend of initial jobless claims. Exactly where and when one gives way to the other is debatable and inherently speculative in real time.

Good news in tomorrow’s payroll report for January would certainly go a long way in easing our concerns about the recent rise in jobless claims. In short, we’d like to see at least some modest job growth on a net basis for nonfarm payrolls. Indeed, the hour is late—it’s now well beyond two years since the recession began and monthly nonfarm jobs dipped into the red on a monthly.
Almost a year ago we wrote that a peak in jobless claims would bring a strong signal that the end of recession was near, at least on a top-down, GDP-measured basis. As it turned out, jobless claims peaked in March 2009 and the rest of the year was generally one of recovery on a number of broad economic metrics along with the stock market, which rallied dramatically from the spring of last year onward.
But now we have the possibility that the decline in initial jobless claims is stalling. It’s too soon to say for sure, of course, but the possibility is suddenly no longer beyond the pale. Before we say any more, let’s first have a look at tomorrow’s payroll numbers.