Initial jobless claims rose moderately last week, but this doesn’t tell us much. The good news is that claims remain close to a four-year low and the unadjusted year-over-year change in new filings for unemployment benefits continues to fall by roughly 10%. In short, there’s still no sign of trouble in the claims data, which suggests that the labor market will continue to expand slowly.

Last week’s increase of 8,000 pushed total claims up to a seasonally adjusted 365,000. But stepping back and considering the jump in context with recent history implies that nothing much changed last week. This data series isn’t improving, but neither is it deteriorating. No news is still marginally good news, however, with the weekly numbers bouncing around the lowest levels in several years.

A more-encouraging signal can (still) be found in the annual pace of unadjusted claims. As the second chart shows, claims continue to fall at a healthy pace—roughly 10%–relative to year-earlier levels. If and when the year-over-year change moves sharply above zero, that would be a dark sign for the labor market and the economy overall. For the moment, however, there’s still a sizable margin of comfort between here and there.

The question is whether the recent deterioration in the manufacturing sector, both in the U.S. and abroad, is a sign of bigger problems to come in the weeks and months ahead? If it is, we’ll see clear signals in the data, including jobless claims. But not yet. The last full month of data (June) looked supportive for arguing that recession risk was low, a message confirmed in other metrics, such as the Chicago Fed National Activity Index.
July’s update may tell us different. Next up on that front is tomorrow’s jobs report for July from the Labor Department. We need an encouraging number here to keep the macro blues at bay. The ADP Employment Report for July suggests that a marginally rosy outcome is a possibility and the consensus forecast agrees. Economists are looking for a net gain of around 105,000 in private non-farm payrolls for last month, according to Briefing.com. That would be a modest improvement over June’s 84,000 rise. Better, but we need triples and home runs as opposed to singles, which is the more likely scenario. And so, for the moment, we are on the fence, with the potential for tipping either way.
“It is still a difficult job market,” Ryan Sweet, a senior economist at Moody’s Analytics, tells Bloomberg. “Companies are not panicking by cutting workers. They are going to wait out the uncertainty related to Europe and the U.S. fiscal cliff.”
“The claims number is not that bad,” observes Cary Leahey, a senior economist at Decision Economics, via Reuters. “There does seem to be some difficulty dealing with the seasonals this time of year whether it’s auto plant closures or lack thereof.”
Maybe tomorrow’s payrolls news will set us straight.