Sometimes the waiting game is the only game in town when it comes to evaluating the economic numbers du jour. That seems to apply to this morning’s updates in consumer inflation and weekly jobless claims. The news tends to be encouraging, but we’re still a long way from declaring victory.

The number of new filings for jobless benefits dropped last week by a modest 5,000 to 457,000, the Labor Department reports. That’s a step in the right direction, given the recent concern that something more ominous was brewing. Yet jobless claims are still too high to offer comfort that the labor market’s capacity for minting new positions is set to bubble. At least new claims aren’t rising. Nonetheless, the threat of claims stuck in the 450,000 range continues to lurk, suggesting that the job creation process is still gummed up. Until we break below that level, it’ll be hard to shrug off the risk.

Meanwhile, inflation remains subdued, based on today’s inflation report. The consumer price index last month was unchanged from January, the Bureau of Labor Statistics advises. For the past 12 months, CPI inflation rose at a modest 2.1%.
Last month, the inflation report raised fresh concerns that deflation was again building a head of steam. In particular, core CPI (headline inflation less food and energy prices) slipped a bit in February. That was the first monthly decline in seasonally adjusted core CPI since 1982. A whiff of deflation, in other words, was in the air—again, as we wrote last month. In the wake of today’s update, there’s reason to think that last month’s bout of deflation was an anomaly. Still, with prices overall edging up by the thinnest of margins, it’s too soon to make definitive judgments one way or the other.
So it goes in evaluating current and future economic trends. With the great rebound from the abyss in late-2008 and early 2009 behind us, the heavy lifting of rebuilding the economy is upon us. Dramatic change, good or bad, seems unlikely for the foreseeable future. Instead, the back and forth of marginal adjustment may be with us for some time. The economy is struggling to pull free from a sea of debt on the balance sheets of government, businesses and consumers. On the plus side, monetary/fiscal stimulus, supported by the natural forces of cyclical recovery, is fighting the good fight.
We expect the forces of expansion to win, but the evidence of this triumph will come slowly, at times giving way to frustrating bouts of reversal. We’ve already seen this to some extent in jobless claims this year, as well as with consumer price. More of this backtracking is likely coming on various fronts.
Nonetheless, there are accumulating signs that the tipping point of expansion is near. It’s going to be a struggle, to be sure. And much still depends on the labor market. Maybe the arrival of spring will be a catalyst. Heck, the economic cycle needs all the help it can get at this point.
A bit of good luck wouldn’t hurt either. A surprisingly good report on the job front in the weeks and months ahead might just be the spark that gets us over the hump. Unfortunately, a negative surprise might bring the opposite. It’s still precarious out there. Look out for falling shoes. But don’t give up hope just yet.