Today’s initial jobless claims report is a yawn with last week’s new filings for unemployment benefits showing no change from the previous week’s total, which was revised upward slightly. But the latest numbers don’t provide any reason to question the persistence in the recent decline for this series. The unchanged 351,000 seasonally adjusted total for new claims last week is still the lowest since early 2008.
As recently as last month, claims were over the 400,000 mark. The fact that the latest update remains lower by 50,000 implies that the labor market will continue growing. In turn, that suggests that growth still has an edge for the broader economy.
“The strength we’ve had in the last few months is continuing,” says Guy Berger, an economist at RBS Securities. “Barring any surprises, February looks like another good month for payroll growth.” Omer Esiner, a market analyst at Commonwealth Foreign Exchange, agrees, noting that today’s claims report is “broadly in line with recent U.S. data showing a gradually improving economic backdrop.”
Yesterday’s data point on residential real estate offers some fresh support for thinking positively: existing home sales rose last month and housing inventory continued to fall, the National Association of Realtors reports. The news bolsters the case for expecting more from housing in months ahead and pondering the possibility that housing has finally bottomed. Tomorrow’s update on new home sales is expected to bring a bit more good news on this front with the consensus forecast calling for another modest rise, according to Briefing.com.
Here’s how the economics group at Wells Fargo interprets the latest housing data via its Feb. 22 update:
“Existing Home Sales Remain Strong”
“Inventory Levels Continue to Fall”
No one argues that the housing recovery—if in fact it is it is a genuine recovery—is the answer to all the economy’s cyclical ills. But if housing is no longer a dead weight, there’s one more reason to think that growth can survive. Some estimates peg housing’s contribution to GDP as high as 18%, which implies that if this sector is no longer part of the problem (even if it’s not yet part of the solution) the demons of contraction will loosen their grip on the cycle’s throat.
The true test, of course, is the labor market, on which so much still depends. Initial jobless claims continue to drop bullish clues, as does the broad trend, as suggested by the moderate revival in the Chicago Fed National Activity Index. The potential for a stronger dose of optimism arrives on March 9 with the scheduled release of the February payrolls data. Meanwhile, steady as she goes.
Granted, Europe’s recession is a joker in the deck that could derail the trend. The same can be said for rising energy prices. But Europe’s downturn may turn out to be “mild and temporary.” As for energy, well, Iran is still the wild card and there’s always reason to wonder what comes next.