Weekly filings of new jobless claims continue to drift lower, and that’s encouraging. But oil prices remain elevated and various global risks continue to bubble. That raises the question of whether the falling trend in new filings for unemployment benefits has legs. The recent strength in jobs creation is one reason for answering “yes,” although the fall in new jobless claims is beginning to look weak again.

In absolute terms, last week’s change was a winner. New claims dropped by a seasonally adjusted 10,000 to 382,000 last week, the Labor Department reports. Both the weekly number and its four-week moving average have been under the 400k mark for weeks now. That suggests that layoffs are retreating and job growth is increasing.

Today’s report doesn’t change that view. Indeed, there’s confirmation in the favorable trend in the continuing claims report, which tracks the population of the unemployed who were already collecting benefits. That number slipped too, falling by 9,000 to 3.723 million (seasonally adjusted) for the week through March 26 (this series lags new claims by one week). That’s the lowest level in nearly three years.
But the slow progress in the decline in new claims is worrisome, if only marginally. Maybe it’s just statistical noise (this series is notoriously volatile, even on a seasonally adjusted basis). Still, at this late date (nearly two years since the recession ended) there’s only modest evidence of job growth. Perhaps, then, the message is (still) that we shouldn’t expect much more than a mild recovery in the labor market. We’ve been anticipating no less all along, and today’s data point doesn’t offer any reason to rethink that forecast. The trouble is that mild job growth two years after the formal end of the recession doesn’t leave much in the way of a safety cushion if energy prices continue to rise and take a toll on the economy. Then again, there’s always something to worry about.
“The improvement in the labor market is for real,” Eric Green, chief market economist at TD Securities, tells Bloomberg. “Growth is on a steady upswing. Sales expectations are rising with more hiring plans.”
Omair Sharif, an economist at RBS, agrees. “The downtrend in initial claims remains firmly in place, and overall the data point to a continued gradual improvement in the underlying pace of layoffs, consistent with the steady progress that we have seen in the payrolls data,” he tells Reuters.
The question is whether the oil market is going to play nice in the weeks and months ahead. As we write, crude in New York is above $109 a barrel. Meanwhile, gasoline prices continue to inch closer to $4 a gallon. “The main worry is that with more of the consumer’s budget going toward gas at the pump, it will hold back the nascent recovery,” advises Anthony Michael Sabino, a professor at St. John’s University business school, via AP. “It will put a crimp into spending plans for corporate America, as the costs of energy, transportation, and so forth rise accordingly.”
Predictably, economists are trimming their forecasts for the U.S. economy as energy prices rise. The good news is that predictions of economic growth, albeit lesser growth, are still the mainstream call.
Meantime, oil prices are volatile and so there’s the possibility that today’s high and rising prices could quickly reverse in the weeks ahead. Maybe, but there’s no sign of that at the moment. Much depends on how much the recent rise in oil is due to fear vs. fundamentals. Parsiing that gray area is as much art as it is science, and so the market continues to struggle with pricing. But with no imminent resolution in sight for the ongoing turmoil in the Middle East—the civil war in Libya in particular—it takes industrial strength optimism to see sharply lower energy prices in the near future. Even then, a retreat in prices may only be temporary, some analysts warn.
For now, the all-important labor market rebound is still chugging ahead. Any signs to the contrary, however, could be a game changer.