New jobless claims dropped last week by a sizable 14,000 to a seasonally adjusted 351,000. That’s a post-Great Recession low, for the second time. Mid-February also witnessed the 351,000 level and the numbers are knocking on this door again.
There are several messages in today’s update. One is that the recent declines in new filings for unemployment benefits are holding their ground. That’s good news because it suggests that real improvement is unfolding in the labor market (despite the challenges of late) and the recent progress in moderately stronger job growth so far this year has legs. The latest decline in claims also sets up this series to poke its way lower to a new post-recession low. A decisive drop in the near future below the 351,000 level would send an even stronger message that economic growth will roll on.
Granted, it could all dissolve tomorrow if the Iranian factor goes ballistic, or some other shock hits. But the fact that jobless claims have continued to stay relatively low after months of declines is a robust sign that the labor market healing will roll on.
“The labor market is gaining momentum,” says Kevin Cummins, an economist at UBS Securities. “Claims corroborate the pickup in employment we saw in February and suggest the pace of the job growth is likely to continue.”
Such forecasts could be dismissed if the corroborating evidence of improving labor market conditions were MIA, but there’s statistical support from several corners. For instance, the annual pace of average weekly hours worked for production and nonsupervisory employees in the private sector has been rising recently at a healthy clip. If the dark forces of recession were ready to pounce, as some analysts insist, it’s likely that we’d see the trend in weekly hours worked deteriorating on a year-over-year basis. Maybe that’s coming, but it’s premature to say that this series has run out of steam.
The future is uncertain, of course, and there are considerable risks to consider. Making definitive arguments for growth is going too far. But so is arguing that the cycle is doomed to stumble. Indeed, if the labor market can hold up, it’s easier to forecast continued growth for the economy, even if it’s destined to remain subpar relative to history. Meantime, there’s even a glimmer of hope that some of the troubling signs for the cycle may be easing. For instance, I’ve been concerned for some time that the deceleration in consumer spending is a troubling signal. But the latest retail sales report provides a bit of light for thinking that maybe, just maybe, this trend isn’t fatal.
If optimism turns out to be dead wrong, we’ll have confirmation soon via a rather large and sudden deterioration in the labor market. In that case, initial jobless claims should provide an early warning of what’s coming. But for the moment, jobless claims continue to offer hope that the macro revival will endure. We can debate if other indicators trump the labor market signals, but at worst, it’s still a debate.