Ah, now that’s better. New jobless claims dropped last week by a robust 36,000, pulling the total under the 400,000 mark on a seasonally adjusted basis for the second time since the Great Recession was formally declared null and void as of June 2009. Is the second time the charm?

There are lots of reasons to be cautious on declaring the latest descent below 400,000 as the start of a new round of strength in the labor market. But the case for optimism is far from hopeless. The primary factor for thinking positively is the general revival in the economy, as suggested by the stronger pace of growth in GDP in last year’s fourth quarter. The missing link so far is strong, or at least a stronger pace of job creation. The latest payrolls report for January, alas, isn’t very helpful on seeing the glass half full, although perhaps the weather skewed the numbers. If so, maybe the January jobs report is stronger than it appears.

As for jobless claims, the latest data point is at least a step in the right direction. Of course, that was true in late December, when claims dipped below 400,000 for the first time. But it was a head fake. Will it be different this time? Perhaps there’s significance in the fact that new claims have dropped sharply in three of the past four weeks.
“The labor market is improving,” Brian Jones, an economist at Societe Generale, tells Bloomberg. “Fingers crossed, if the weather can hold off this week, we should get a pretty decent snap back in non-farm payrolls and maybe another drop in the jobless rate.”
In between reading the weather forecasts, here’s a little perspective on the long-run relationship between initial jobless claims and payrolls. The next chart below compares indices of each over the last four decades. The linkage isn’t surprising, nor is the trend obscure. When jobless claims rise, the annual change in total nonfarm payrolls falls. What’s striking in the recent data is the magnitude of the changes, and the lack (so far) of the snapback effect that usually prevails in a timely manner.

No one needs to be reminded that the rebound in the labor market has been sluggish, but facts are facts. But has the economy now paid sufficient penance to the macro gods for the sins of the past? Maybe, maybe not, but waiting and hoping is getting old. An unnamed Labor Department official boiled it all down to the essential point by reminding today: “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”
It still not over till it’s over, and for the moment it’s still not over.