The jury’s still out on the path of least resistance in the trend for initial jobless claims. Today’s weekly update is certainly a step in the right direction, although last week’s meager drop in new filings for jobless benefits falls far short of stellar, or convincing. The sluggish behavior of late in this series has kept us anxious for more than a month, and the number du jour doesn’t change much.
Initial claims were 462,000 (seasonally adjusted) for the week through March 6, the Labor Department reported this morning. That’s down slightly from the previous week’s 468,000. But as our chart below reminds, it’s unclear if the broader decline that’s been in place for a year has stalled. In the dark art of reading recent history as a guide to divining the future, one can argue that the risk of a new surge in claims has diminished. If so, that’s encouraging, but we now must confront the more pressing question: When will the decline resume?
This is no trivial matter, considering the value of initial jobless claims as one of several leading indicators for the economic cycle. (For some background, see our previous posts here and here. In addition, you can find some examples of the formal research on the subject here.) The best we can say at this point is that the jury’s still out on the big picture trend. Jobless claims are a volatile series on a weekly basis, and even over longer stretches, as the chart above reminds. But the time is running short when we can look at a sideways-moving trend in claims and dismiss it as statistical noise. All the more so at a time when the labor market’s capacity for creating new jobs remains, at best, questionable, as the latest update in nonfarm payrolls shows.
Meanwhile, we take no encouragement from the trend in continuing claims, which tracks the population of folks who’ve been collecting jobless benefits for more than a week. This number is reported with a lag relative to initial claims, but the latest figure reported today supports the case for thinking that we may be moving sideways for some period of time in the job market overall. For the week through February 27, continuing claims rose by 37,000 to 4.558 million (seasonally adjusted). And as our second chart below shows, this series has been going nowhere fast so far this year.
But all’s not lost yet, advises James O’Sullivan, global chief economist at MF Global in New York. “The net rise in the last two months was because of temporary factors, notably weather effects,” he tells BusinessWeek today. “Claims will likely have to resume a downward trend if payrolls are to improve, which we think will happen.”
Hope springs eternal, or at least until next week’s report.