The jobless claims data is still choking on the backlog blowback, or so it seems based on today’s weekly update on new filings for unemployment benefits. The modest dip in claims for the week through October 12—down 15,000 to a seasonally adjusted 358,000—is a step in the right direction after the previous surge skyward, which is also attributed to the after-effect of computer glitches. But the latest slide falls well short of convincing evidence that the trend is headed lower once more.
The main headwind for why we didn’t see a bigger drop in today’s data is a hefty rise of nearly 33,700 in new filings in California—an increase that the Labor Department says reflects a “backlog of claims which could not be processed previously.” Whatever the explanation, today’s data for the nation overall still leaves plenty of room for doubt about what it all means in terms of deciding how the labor market is faring.
All that aside, let’s consider the numbers as given, starting with the fact that today’s report leaves claims in relatively elevated terrain. Ignoring the previous week, today’s update pegs claims at the highest elevation since March. Meanwhile, the four-week average continues to climb and is currently the highest since July.
The good news is that the positive trend that was interrupted recently seems to be reasserting itself. Indeed, the year-over-year change in weekly claims is falling once again. New filings dropped nearly 7% last week vs. the year-earlier report. That’s an encouraging sign for thinking that the recent volatility may be noise after all. Nonetheless, it’ll take several more weekly releases to muster more persuasive evidence that the labor market is still healing.
The last data point we have for US payrolls proper comes from ADP, which reported that private sector employed increased by a modest 166,000 in September vs. August. That’s not terribly impressive, although the year-over-year trend looks better, as I noted earlier this month. In fact, the annual rate of increase in ADP’s estimate of private payrolls inched higher in the latest reading: +2.4%, which is the most in over a year.
The bottom line: there’s still a case for optimism that the labor market will continue to expand at a modest pace. Confidence has taken a hit lately, primarily because of the nonsense in Washington. But there’s still no smoking gun that tells us the business cycle hit a wall, at least not yet.