You can almost hear the collective sigh of relief after reading this morning’s update on initial jobless claims. There really wasn’t much room for more bad news, which makes last week sizable fall in new filings for unemployment benefits all the sweeter. Yup, we dodged a bullet here–for the second week in a row. Jobless claims are still running too high to offer much comfort, but there’s a stronger argument today in favor of seeing the recent jump in this series as a statistical blip…maybe. One week at a time here… again.

In any case, new claims tumbled by 29,000 last week to a seasonally adjusted total of 409,000. The drop follows the previous week’s revised 40,000 decline. That brings us back into the range of claims that prevailed before new filings suddenly surged in April and sent shivers down the spines of optimists everywhere. Claims are still running at recession-level numbers and so there’s no room for celebration. But if the weeks ahead bring more signs of progress–just holding steady would be progress at this point–we may be close to writing the recent past off as just one of those things.

Some economists are already leaning toward that interpretation. “There has been a lot of volatility in recent weeks and it looks like the prior week’s number was bolstered by all the damage from the tornadoes in Alabama and also to some of the layoffs due to parts shortages at the auto manufacturers,” advises Mark Vitner, senior economist at Wells Fargo via Reuters. “When you take into account those temporary glitches the trend in jobless claims looks a little bit better, although 409,000 weekly jobless claims is still pretty high.”
Deciding when new claims are poised for a sustained tumble is anyone’s guess. Until materially lower numbers arrive, however, the labor market’s likely to continue growing at a modest rate. In other words, we’re still digging ourselves out of the same hole we had before the April surge. At least the hole isn’t any deeper, although it was plenty deep enough to begin with.
“Unemployment remains stubbornly high, hampering overall consumer sentiment and spending,” Gregg Steinhafel, chairman and chief executive officer of the retail chain Target, complains via a conference call yesterday according to Bloomberg. “While the U.S. economy is showing some signs of improvement, we expect the recovery will continue to be slow and uneven.”
For the time being, there’s not many willing to offer a dramatically brighter forecast.