Today’s update on weekly jobless claims delivered a wallop—in the right direction for a change. It may be another head fake, but on its face this morning’s report is the best news in months for this measure of the job market. It’s only one number, of course, and so all the usual caveats apply. All the more so given the volatility in this data series and the fact that we’ve been hoodwinked many times before in thinking that the stat du jour on this front was a sign of improvement in the labor market only to find that, well, it wasn’t. But for the moment, there’s a new talking point on Wall Street and it’s a refreshing change of pace from the usual gloomy news.
New filings for jobless benefits surprised economists by dropping a robust 21,000 to 434,000 on a seasonally adjusted basis for the week through October 23. That’s the lowest level since mid-July. As our chart below suggests, the drop may be the start of a new phase in—dare we say it?—job creation. Actually, that’s too strong until we see more numbers in the weeks ahead. Let’s say this morning’s number suggests a potentially new round of lesser job losses. One day at a time in macro in the new normal. In any case, the general change in direction is encouraging, at least relative to the trendless trend that’s prevailed.
Even if jobless claims continue to dip, it’s unlikely that the labor market is about to explode on the upside. Modest growth…continued growth? Sure, that’s still our baseline scenario, albeit with caveats. There’s still too much fundamental negativity in the economy to expect deep and wide job creation. But that doesn’t preclude some relatively good news for the near term. Just don’t forget: There’s still a long way to go in repairing and righting the number-one problem in macro: weak job growth. And no matter what today’s jobless claims imply, or don’t imply, there’s still no silver bullet out there. If you think otherwise, read a few reports about residential real estate, for instance. The healing will take time and suffer setbacks, and there’s no way to change that reality any time soon. Marginal improvement, however, is possible, maybe even likely and (if we’re truly an optimist) it’ll roll on for an extended period. But, hey, let’s not overdo it–it’s only one report.
All that aside, it’s a bit easier to argue today that it’s not going to get any worse and maybe, just maybe, it may start to get a little better. “Job growth is modest right now, but it should improve,” Joel Naroff, president of Naroff Economic Advisors, told Bloomberg ahead of today’s report. “People will be surprised at how much better the labor market looks like in six months.”
Is today’s update a downpayment on that surprise? Stay tuned…