Weekly claims for new unemployment benefits are in a holding pattern these days. But holding for what?

For the third straight week, new claims hovered at just under 390,000 on a seasonally adjusted basis last week, the Labor Department reports. That’s the highest since January and it’s a sign that recent revival in the labor market has slowed. That was certainly the case with the March payrolls report, which reflected a sharp slowdown in jobs creation. The modest rise in jobless claims in recent weeks implies that there may be more to the new sluggishness in the labor market than one drab month for payrolls.

But if the recent rise in jobless claims is worrisome—and it is—there’s still room for debate about what it means on a broader scale for the weeks and months ahead. Even with last week’s seasonally adjusted 388,000 tally, new claims are still near the lowest levels in nearly four years. As the chart above reminds, weekly filings have been falling fairly persistently for most of the past year. A few weeks of modestly elevated numbers doesn’t erase this progress, but the question is turning to whether the progress has hit a wall?
“It’s just so hard for companies to be confident and start hiring,” Yelena Shulyatyeva, an economist at BNP Paribas in New York, tells Bloomberg. “We believe that March is probably not the end of the modest readings on payrolls.”
It’s surely troubling that the year-over-year momentum has faded recently. The annual percentage change for the raw, unadjusted jobless claims numbers has moved dangerously close to zero in the last two weeks. That’s a signal that something has changed, if only on the margins. Two weeks falls well short of definitive proof that the game is over, but a few more numbers like this and it’ll be time for a sober reassessment of the labor market’s prospects for continued growth.

Meantime, there’s a growing collection of troubling signs elsewhere on the macro landscape, starting with today’s update of the Chicago Fed National Activity Index: “All four broad categories of indicators that make up the index deteriorated from February, with the production and income and personal consumption and housing categories both making a negative contribution to the index in March,” advises the accompanying press release.
The retreat only feeds the anxiety after yesterday’s weak durable goods report. The ongoing deceleration in personal disposable income growth and the recent stagnation in industrial production aren’t cheering anyone either.
On the bright side, consumers continue to spend at a brisk pace, based on the March report for retail sales. But Joe Sixpack may not be reading the economic reports as closely as yours truly. Eventually, however, the word will drip out.
What’s beyond debate is that a strong labor market is the critical factor, particularly now. It’s premature to assume the worst, but unless there’s convincing evidence to the contrary soon it’s going to be increasingly difficult to think optimistically. Once again, for the third year in a row, spring has left us betwixt and between.
“This was a disappointing number and offers more evidence that the labor market continues to lose traction,” notes Joe Manimbo, an analyst at Western Union Business Solutions via Reuters.
The priority now is looking for economic news that refutes the recent gloom surrounding the latest batch of numbers. The next opportunity for at least partial statistical redemption arrives tomorrow, with the government’s first guess at first-quarter GDP. Alas, the consensus forecast sees only a 2.5% gain for the U.S. economy in the opening three months of 2012, according to Briefing.com, or down from 3.0% in last year’s Q4.