Jobless Claims: Is the Broader Trend Stuck in Neutral?

Initial jobless claims dropped last week—the first since the drop at the end of March. But the question remains: Is the broader trend stuck in neutral?

New filings for jobless benefits slipped by 24,000 for the week through April 17 on a seasonally adjusted basis, the government reports. But we’re still wondering if the end of job destruction will soon bring job creation on a sustained and meaningful basis. If there’s a clue in the recent trend in initial claims, it’s not obvious in the data. As our chart below shows, new filings have been moving sideways in the mid- to upper-400,000 range for much of the year so far.

It’s not out of the ordinary for claims to move sideways for a spell after recessions. Eventually, the downtrend resumes as the economy recovers. But given the severity of the recent economic contraction and the sluggish rebound in payroll growth (so far), we’re a touch cautious on expecting salvation in the near future. Deciding if this is merely a pause that refreshes, or one that signals an extended bout of sluggish labor market activity, remains to be seen.

Speaking of the future, the next monthly employment report is scheduled for release on May 7. The crucial question: Was the March rise in nonfarm payrolls a sign of things to come? Or will we be hornswoggled by the April update?

Till then, there are two more weekly jobless claims updates to ponder. Meanwhile, economist Evelina Tainer offers some guidance for thinking about jobless claims, starting with the caveat of managing expectations when it comes to the update du jour. “Do not fall into the trap of assuming that a decline in the number of reported initial jobless claims automatically means an increase in non-farm payrolls,” she writes in Using Economic Indicators to Improve Investment Analysis. “Jobless claims are the direct result of layoffs. Just because fewer persons were laid off, does not mean employers increased hiring.”

About James Picerno 900 Articles

James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers.

Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg, Dow Jones, Reuters.

Visit: The Capital Spectator

Be the first to comment

Leave a Reply

Your email address will not be published.