Jobless Claims Fell Again Last Week

New filings for unemployment benefits inched lower last week, dropping for the second week in a row. The decline of 2,000 to a seasonally adjusted 326,000 for the week through January 11 is a welcome sign, of course. But the trend looks a bit sluggish lately, raising questions about the potential for stronger growth in the labor market in the months ahead.

There’s still a fair amount of distance between the current level of new claims and the post-recession low of 294,000 in mid-September 2013. Filings may eventually fall under that low-water mark, but for the moment it seems like the downward momentum has slowed to a crawl.

The good news is that claims continue are still retreating at a healthy rate on a year-over-year basis. New filings dropped 7% last week vs. the year-earlier level. But here too the momentum has decelerated: the annual rate of decline is roughly half as much as the previous week’s pace of descent. A warning sign? Or is it just another installment of noise that’s affected and distorted this data set lately? To be determined.

Meantime, at least one economist thinks the implied macro outlook via jobless claims still deserves respect as a bullish factor. “The level of claims is now consistent with a healthy labor market turnover,” Yelena Shulyatyeva, US economist at BNP Paribas, tells Bloomberg. But a familiar caveat still applies, she adds, noting that “companies are still reluctant to hire and invest, so that’s the real issue. For the economy to accelerate, we need to see acceleration in hiring.”

That’s exactly what we didn’t see in the December payrolls report from the Labor Department. But here too there’s some wiggle room to consider. As economist Bob Dieli at writes in a recent report for clients:

Part of the reason we had such a paltry gain in the total was because of what you see here [see chart below]. In the comments that came with the report, the Bureau of Labor Statistics (BLS) noted that there had been a 13,000 person decline in employment at nonresidential specialty trade contractors. This accounted for the bulk of the 16,000 person total decline in construction employment [in December 2013]. The BLS noted that the drop in contractor employment reflected unusually cold weather in parts of the country. I can’t wait to see what happens here in January where, as we well know, most of the country felt the full effect of the Arctic Vortex for several days.

Meantime, the latest jobless claims data doesn’t throw cold water on the idea that cold weather put employment growth into a temporary deep freeze. Then again, the tepid drop in the latest claims release isn’t especially encouraging if you’re looking for compelling evidence that the January payrolls report is on track to wow us with a sharply higher rate of growth.

But in a paper-thin attempt to emphasize the positive, we can at least say that the trend for jobless claims remains positive so far in the 2014 data.