Jobless Claims: Stalled Again

Initial jobless claims are going nowhere once more. And that’s the optimistic view. It’s not the first time that the trend looked like it was turning favorable only to hit a wall. It’s probably not the last time we’ll suffer a headfake, but that doesn’t make it any more frustrating. The good news, in relative terms, is that new jobless claims aren’t moving in a fatal direction, not yet. The main fallout is that the hope of a follow-through to the recent drop hasn’t materialized. In other words, we’re still stuck in the land of neutral. That’s not good, but it’s not a smoking gun for expecting a new recession either–not today, at least, given the numbers in hand.

New filings for unemployment benefits rose again last week by 5,000 to a seasonally adjusted 417,000. That’s puts new claims at the highest level since early July. But a big chunk of the recent rise may be due to a “special factor,” according to the Labor Department:

Even if you accept the explanation at face value, new claims don’t seem to be falling much, if at all. As the chart below reminds, this series remains stuck in an elevated range. The implication: the labor market’s recovery will remain sluggish and prone to setbacks. So, what else is new?

But let’s strip out the noise and look at raw claims data on a year-over-year basis. Here too the trend has suffered a modest reversal of fortunes. Nonetheless, claims remain lower by 11% vs. the year-ago number. That’s encouraging, since it’s still more than a trivial decline. Unfortunately, the margin of comfort seems to be fading. A few more weeks of this and this trend would start to look more ominous.

For now, we’re in a holding pattern. But the good news here is also the bad news. The trend in claims may not be getting any worse, but it’s not improving. Stephen Stanley, chief economist at Pierpont Securities, emphasizes the key challenge by reminding that “the problem over the last 18 months to two years hasn’t been the layoff side. The real problem has been we’re not getting the normal pace of hiring [that comes with a recovery]. For all the talk of impending doom in the economy, there is still not a lot of evidence of that.”
No one’s likely to dispute the point after reading today’s update.