Last week we considered the possibility that the declining trend in new jobless claims had run its course. Today’s update on new filings for jobless benefits offers a reprieve from that ominous possibility. The reprieve may be temporary, of course, but for today at least it appears as though the nearly year-long decline in new filings remains intact–weak but intact.

Initial claims dropped by 8,000 last week from the week before, falling to 470,000. As our chart below shows, the general decline continues to look to look alive if not exactly well (the blue line is the linear trend). It’s too early to declare that the fall in jobless claims has run out of momentum, but this dire possibility can’t be ruled out.

One reason for remaining anxious comes via the continuing claims report, which suggests that the long-running descent in this data series has hit some turbulence, as our second chart below shows. Of course, continuing claims are reported with a one-week lag and so the latest numbers (through January 16) may simply reflect the jump reflected that week in initial claims–a jump that now seems to have given way to a resumption in the decline.

In any case, the next few weeks will be critical, for good or ill, in the recovering labor market, such as it is. In order to instill a new round of optimism, we need to see jobless claims dip below 400,000 and continuing claims fall under 4.5 million over the next month or so. Otherwise, one might seriously wonder how much expansionary momentum remains in the labor market.
It’s clear that much of the “progress” we’ve seen in the job market so far has been a function of sidestepping economic apocalypse. In other words, the negative momentum of shedding jobs has slowed over the past year, arguably to the point that employment is now simply treading water rather than sinking. The great question is whether we can generate net growth on a sustained basis. We are knee-deep in the middle of this transition and early clues of how the shift is faring will come from initial and continuing jobless claims reports as well as from the employment report. So far there’s still reason to remain optimistic but the hour is late. More convincing signs of positive momentum are required, thus the numerical benchmarks noted above.
Meanwhile, new orders for durable goods rose last month, the Census Bureau reports. And not a moment too soon. December’s 0.3% rise is the first since September.
“The jobless claims number suggest that the job market is still struggling,” Alan Gayle, senior investment strategist at Ridgeworth Investments, tells Reuters today. “However, it is encouraging that orders were up. To me, that reflects a continued return to normalization in production levels, which will be a positive for growth during the first quarter.”
Nonetheless, there’s still a risk that the economy may stall later this year, as we discussed here and here. Initial jobless claims will continue to offer some clues as to the depth and magnitude of this risk. On that front, there’s still reason to worry. The numbers that arrive in the weeks ahead will determine if we should also panic.