New filings for unemployment benefits fell last week, dropping the most since early September. Is that a sign that the labor market will grow at faster rate? Maybe, although we’ll know more if we see claims drop further in the weeks ahead. As for today’s update, the fact that the trend in new claims is again drifting lower is a positive sign, and one that may develop into a stronger tailwind for raising the growth rate for payrolls.
Meantime, let’s review today’s numbers in context with history. Claims dropped a healthy 21,000 last week to a seasonally adjusted 323,000. As such, claims are now at the lowest level since the week through September 28. It’s also encouraging to see the four-week moving average falling for the third straight week—a decline that suggests that there really is an improvement here that transcends the volatile weekly data.
The dramatic 20% year-over-year decline in claims through last week looks even better, although we should reserve judgment on this front. Last year at this time claims soared due to the fallout from Hurricane Sandy. The surge in new jobless filings in November 2012 was a temporary setback, and one that was unrelated to the business cycle. But the annual comparisons will remain compromised for a few more weeks until the Sandy factor fades from the year-over-year analysis. Considering last week’s strong decline in claims, however, it’s reasonable to assume that a substantial rate of year-over-year declines will endure for the foreseeable future.
The positive momentum that was in force this year through late-September was derailed in October, probably because of the government shutdown. But the November numbers so far suggest that the bullish trend is making a comeback.