The favorable trend in weekly updates for initial jobless claims over the past two months remains intact with today’s release. New filings for unemployment benefits in the U.S. on a seasonally adjusted basis dipped by 3,000 last week to 420,000, the Labor Department reports. That’s hardly a definitive sign that all’s well, but the modest decline of late appears to be alive still, giving hope to the notion that the trendless trend for this series that prevailed earlier this year is now history. Such is the diminished definition of progress these days when it comes to the labor market.

The sluggish decline in new jobless claims arrived late and remains tentative. That’s in keeping with this installment of the economic recovery generally. If this was a statistic without corroboration, it would be highly suspect. But the mild thaw that seems to be unfolding in the labor market draws support from a variety of economic trends elsewhere in the economy.

Retail sales, for instance, continue to look perky, as we noted earlier this week. And yesterday’s news that industrial production posted its biggest gain last month since July, while inflation remains tame, only strengthens the case for thinking that the economy is on the mend.
“The manufacturing sector continues to heal itself,” John Herrmann, a fixed-income strategist at State Street Global Markets, tells Bloomberg. “The outlook for business spending on equipment and software remains very positive.”
Even the battered housing market showed signs of life last month. Housing starts in November rose 3.9%, the Census Bureau reports today—the first gain since July.
It’s still too early to break out the champagne, and that’s not likely to change any time soon. There’s not going to be a conspicuous turning point this time. Barring an unexpected shock, the economic recovery is going to proceed in the year ahead, but slowly, tentatively and suffering period setbacks that shake the faith. It’s going to be just as easy to raise doubts as it is to look on the bright side for many months to come. Of course, economic pundits are old hands at this game by now.
Meantime, it’s still all about the labor market, and even the optimists recognize that this is the weak link in the recovery and it’ll remain so for the foreseeable future. The job-creation machine is tepid, as the latest payrolls report reminds. Expecting a substantial change for the better in the months ahead is probably asking for too much. But growth is still intact, and it’s likely to roll on.
In the grand scheme of the business cycle, one could say that not much has changed since we surveyed the year ahead back in January. Our conclusion then is no less valid today. As we opined 11 months ago: “No one should doubt that an economic recovery is underway. But no one should assume that the rebound is robust or destined to quickly bring economic healing on a broad scale. It’s different this time.”