It’s still not over, but it’s getting close.
When we took a hard look at initial jobless claims as a leading indicator this past March, we wondered if this data series would live up to its historical record as a robust clue about the end of the recession. The answer is always in doubt in real time, but yesterday’s data points certainly keep hope alive.
New filings for jobless benefits dropped to 601,000 last week, the lowest since late-January, the Labor Department reported yesterday. To the extent these reports hold true to their record over the past 40 years, there’s still reason to think that the technical end of the recession has arrived or is imminent.
A bit of corroborating evidence arrived in yesterday’s retail sales report, which revealed a seasonally adjusted rise of 0.5% for May, the first monthly rise since February. That’s certainly welcome, all the more so since the gains were fairly broad, albeit with some exceptions. Nonetheless, there’s a reason for our qualifying label of “technical” above in considering the end of the recession now or in the near future.
Indeed, one need only look at the still huge number of continuing claims for jobless benefits to recognize that the ranks of the unemployed have swelled to extraordinary levels and remain at painfully high levels. That bodes ill for a sustained rise in retail sales for the foreseeable future as well as a robust economic recovery that would be hailed as a real expansion on Main Street.
It’s worth noting that the December 2007 start of the current (or recently ended?) recession, as per NBER, was only obvious well after the fact. Although there was growing wariness among some analysts and investors as 2008 unfolded, it wasn’t until midway in the year that the writing was finally on the wall for all to see. No less will be true in reverse, and then some.
The depth of the past and current ills weighing on the economy will remain a heavy burden for many quarters and, to some extent, several years. The risk of a double-dip recession can’t yet be ruled out. Ditto for worrying about a mild, virtually unrecognizable rebound that looks and feels like a weak recession to the man on the street.
It wouldn’t surprise us if, late this year, NBER looks back and declares that the recession ended midway in 2009, or thereabouts. But while the technical finale to this nightmare is certainly welcome, what worries us is what comes after. This time, there’s more reason to wonder than usual. Yes, the end may be near, but the beginning is still further away than it appears.