Today’s weekly update on jobless claims shows another dip, which provides more evidence for thinking that the recession is over. But as we keep repeating, the technical end of the recession doesn’t look poised to offer a quick, robust recovery this time. The qualification draws support from the uptick in the latest continuing jobless claims report.
We’ve discussed our outlook many times over the past months and we’ll refer readers to previous posts for background, including here and here, for example.
As for the latest numbers, new filings for unemployment benefits dipped to 545,000 last week, down from 557,000 previously. New jobless claims are now at the lowest since mid-July and well under the peak set back in March. More importantly, the downward trend appears to remain intact.
What’s worrisome is the fact that continuing claims ticked up for the week through September 5 (continuing claims are reported with a one-week lag behind initial claims). That suggests that the unemployed aren’t finding new jobs. It’s still early to make definitive conclusions, given that the recession is still a fresh wound in the economy’s hide. Indeed, job creation is typically among the last corner to rebound after a recession.
Nonetheless, for reasons we’ve discussed previously, there’s reason to be suspicious that the labor market is set to rebound strongly in the weeks and months ahead. Even assuming that jobs come back slowly as a general rule, the oulook for labor growth appears unusually sluggish in the months and perhaps years ahead. If our forecast proves accurate, one clue that it’s coming to pass will show up in continuing claims that remain high or rise relative to initial claims. And that’s just what seems to be happening, as our second chart below shows. We’ll need to see how the two data series unfold in the weeks and months ahead, but for the moment we’re cautious on expecting continuing claims to suddenly turn down and maintain the downward bias with initial claims. We’ll see.
Again, it’s still early in this part of the recovery cycle and so the jury’s out on making final decisions. Indeed, there’s still lingering fears that the recession isn’t over, although that worry seems less relevant with each passing week.
In any case, we expect the crowd to refocus its attention on the labor market in the weeks ahead, and the prospects for quick satisfaction look dim on that front at the moment. The recent upturn in non-labor macro indicators suggests otherwise. But to the extent the marketplace is expecting a follow-through with jobs, it’s too early to start the celebration.