We were so close. Last week’s initial jobless claims report tempted optimistic expectations with a notable decline in new filings to the lowest level since July 2008. It looked like salvation had arrived at long last. But a large chunk of that drop evaporated in today’s update from the Labor Department. Claims rose 26,000 to a seasonally adjusted 436,000 last week. Were we hornswoggled again? Not necessarily, at least not yet.

Never say never these days. Yet Jobless claims are highly volatile from week to week and so it’s the trend that’s critical rather than any one number. The good news is that the trend is finally starting to break lower, or so it appears. After 10 months or so of generally treading water, initial jobless claims have been showing signs of punching downward in recent months, albeit in fits and starts…as always. You can see that in the chart below and in the latest four-week moving average, which is now at 431,000, the lowest since August 2008.

Support for thinking that the dip is more than a statistical glitch can be found in continuing claims for jobless benefits, which also appear to be slipping of late.

There’s also a modestly brighter trend in private-sector payrolls for November, according to ADP, which further boosts the case for cautious optimism. Indeed, it’s a bit easier to argue that the icy trend in job growth is beginning to thaw. No one should expect a full-out spring melt, but the winter freeze in the labor market may be headed for warmer days.
Even so, don’t expect too much heat in job creation. It’s still hard to anticipate much more than a modest, precarious recovery, and so the jobless rate is likely to remain static or dip slowly. And it’s still a risky world overall, thanks primarily to large quantities of debt weighing on developed economies. In short, more of the same. In fact, there’s a new hazard brewing. The housing market continues to struggle, and it may get worse before it gets better. New home sales and housing starts are weakening again after bouncing higher earlier in the year. Home prices are also stumbling anew.
Perhaps the critical issue now is deciding if residential real estate will nip the labor market’s rebound in the bud just as job growth is starting to pick up.