Caught In A Trap

There’s still not a whole heck of a lot going on with jobless claims. That’s good news to a degree since it suggests that the recession risk, while elevated, isn’t rising. But it’s also bad news because it’s a sign too that the labor market isn’t likely to break out of its slump with a burst of strong job growth any time soon. This could on for a while and it probably will.

New filings for jobless benefits were virtually unchanged last week, slipping by 1,000 to a seasonally adjusted 404,000. Despite the usual volatility in claims data this year, this series hasn’t changed much since last Christmas.

“The labor market is treading water, maybe slightly better than that,” says Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. “Hanging out around 400,000 claims is indicative of a still very soggy labor market that is not going anywhere fast.”
Until further notice, it’s best to wear boots as we slog through this statistical glop in the weeks ahead. Unless of course you see the glass as half full rather than empty. That’s a high standard these days but Jeffrey Greenberg, an economist at Nomura Securities, makes the trek: “The trend is going in the right direction,” he reasons.

Despite relatively week payrolls over the past few months, it’s been an issue of firms not adding to their payrolls rather than firms starting to cut because of economic uncertainty. That means that firms are in the position to eventually start adding.

We see it as a relatively bright spot in a mixed bag of data and so far we’ve seen a lot of relatively strong hard data in the past few weeks despite sentiment and general soft data telling us there’s been a lack of confidence. But as was made clear by the minutes to the FOMC yesterday and Plosser’s comments, even if we get good data out of the U.S. it doesn’t mean that much because the focus is really on Europe.

There’s something to that. Compared to Europe, one can argue that the U.S. looks just peachy. Alas, it’s hard to eat relative growth.