If there’s reason for optimism about the state of the U.S. economy, you won’t find it in today’s update on jobless claims.
As our first chart shows, the bias toward the upside continues with new filings for unemployment benefits. Certainly the modest dip in new claims last month appears to be fading. Last week, new filings rose to 444,000, up from 429,000. That’s still below the recent high of 457,000 set on August 2, but the upward momentum doesn’t look like it’s about to fade any time soon.

Another clue about the state of the job market comes by way of continuing claims for unemployment benefits. This pool of the previously unemployed is much larger than the new arrivals, and the ranks of those who’ve been collecting checks from the government for some time continues to swell, as our second chart below illustrates. Today’s update on continuing claims reveals that 3.435 million were drawing unemployment benefits for more than a week in the week ending August 23.

Keep in mind that the stress in the labor market didn’t drop out of the blue. Looking at the initial claims chart above suggests that the early signs of trouble go back a year or more. At first, the gentle rise of new claims was subtle, and therefore widely dismissed. In recent months, the trend became too obvious to ignore, and by this editor’s reckoning the rise will roll on in the coming weeks and perhaps months.
“The labor market will continue to worsen,” Dana Saporta, an economist at Dresdner Kleinwort in New York, told Bloomberg News ahead of this morning’s jobless claims report. “I look at claims and see much higher readings than just a few months ago, and I see that as consistent with the rising unemployment rate.”
Today’s numbers don’t offer reason to think otherwise. In turn, the soft labor market will likely keep the Fed from raising interest rates. That raises the question of whether, or if, inflation will cool. But we’re getting ahead of ourselves. The update on consumer prices doesn’t come until September 16.