Jobless Claims Fell Last Week, But So What?

New jobless claims fell by a seasonally adjusted 12,000 last week to settle at 409,000, but no one’s going to see that as much more than another round of statistical noise. This leading indicator of economic activity has been stuck in a rut for months and it’s going to take more than one sizable downshift to convince the crowd that something’s changed. It doesn’t help that there’s another one-time event in the mix. Some of the drop is reportedly due to the end of the Verizon strike, which pushed new claims higher in early August. But the same factor in reverse had the opposite effect a few weeks back. Round and round we go.

Temporary factors aside, not much has changed with claims. Going nowhere isn’t encouraging for growth, but it could be worse. New claims could be trending higher, but they’re not, at least not recently. There was a disturbing pop higher earlier in the year, but that was an early warning of the current rough patch that’s afflicting the economy. As I noted back in April, when the previous rise in jobless claims was unfolding, “the bigger risk for now is that the economy’s rebound moderates rather than evaporates.” That’s still a good guess, in part because jobless claims, while still elevated, have fallen since the spring. We’d be in much deeper trouble if new claims had continued rising all along.

Meantime, consider the unadjusted data for year-over-year changes in jobless claims, as illustrated in the second chart below. As of last week, new claims were lower by nearly 13% vs. a year ago. That’s encouraging, if only because it suggests that the labor market will meander along. Unfortunately, job creation is weak, as yesterday’s ADP Employment Report reminds. But low growth is still better than no growth. And if the annual trend in jobless claims has any relevance, and I think it does, we’re probably in for more of the same.

“Businesses are putting off hiring plans for the time being rather than going to layoffs,” Ellen Zentner, a senior U.S. economist at Nomura International Securities, tells Bloomberg. “Businesses are holding to the status quo while they await certainty on the economic outlook.”
By that reasoning, it’s best to remind ourselves that we’re still facing a long and slow recovery. That’s old news, of course, but what’s old is new again… and again, and again.