The news in this morning’s update on new weekly jobless claims is bad. In fact, it’s the worst report for this series since the recession ended in mid-2009. The Labor Department argues, according to Bloomberg, that the unusually big jump in claims was due to “auto-plant shutdowns and other unusual events that seasonal variations failed to take into account.” In any case, new filings for unemployment benefits surged last week by a seasonally adjusted 43,000–the biggest weekly jump in more than two years. As a result, claims hit 474,000 for the week through April 30, the highest since last August.
Dismissing this as meaningless volatility isn’t going to be easy until (or if) we see much lower numbers in the weeks ahead. One reason for reserving judgment is the disturbing trend over the past month for this series. For all the talk that the latest number is an outlier, there’s no getting around the fact that the trend over the last several months hasn’t been kind for thinking optimistically. As the chart below reminds, initial claims have been more or less rising since the end of February—steeply and sharply so since early April. The four-week moving average, which filters out a fair amount of the weekly noise, has taken wing as well and is now at its highest since last November.
It seems that the labor market has hit a new round of turbulence. Maybe last week was unusually harsh, but for the moment there’s only hope that lesser numbers are coming. Meantime, it’s debatable what’s causing the rise in the newly unemployed in recent weeks. Nor has the blowback shown up in monthly payrolls numbers yet—or has it? Yesterday’s ADP Employment Report for April was relatively weak. Today’s jobless claims report suggests we should brace ourselves for more disappointing news on the labor market.
It’s all about jobs…again. Nearly a year’s progress in falling jobless claims has been wiped out in a month. That’s no statistical anomaly. Something’s gone wrong with the labor market recovery, which wasn’t all that robust to begin with. In turn, there’s a new dark shadow over the prospects for the broader economy. It’s too early to say where all this is going, but the numbers aren’t giving us any slack for the time being. Until further notice, the crowd will be filtering every economic data point through the lens of the employment picture.
In searching for explanations, sharply higher gasoline prices are at the top of the list of suspects. Meanwhile, Reuters reports:
A Labor Department official attributed the surprise surge in claims last week to spring break layoffs in New York, which added 25,000, and the start of an emergency benefits program in Oregon, which brought in new claimants, including some already on the regular programs.
There were also additional claims from the auto sector, the official said, adding that there could have been some small claims related to the tornadoes that struck parts of the country. However, he said such claims would normally go into a parallel program.
The AP reports the same via NPR:
A [Labor] department spokesman blamed much of the increase on an unexpected spike in applications from New York, where more school systems than usual closed for spring break last week. That resulted in 25,000 layoffs. The department didn’t anticipate the closures when making seasonal adjustments, the spokesman said.
This much is clear: until and if the weekly jobless claims reverses, there’s apt to be a lot more skepticism about the economic outlook. It’s going to be a long week between now and next Thursday’s follow-up claims report. For what it’s worth, I’m expecting the labor market, and the economy, to continue struggling but still maintain modest growth. But as today’s news reminds, even this middling outlook, which I’ve held for some time, is destined to be rattled on a regular basis. Keeping the faith in the cyclical gods, in short, isn’t getting any easier.
It’s always been a fragile recovery and it remains so today, although It’s still a recovery. It’s premature to expect a new recession. The risk, however, is higher, if only at the margins. Then again, assessing such things is fluid, as they say. Evaluating the uncertainty of the future by looking in rear-view mirrors has always been a flawed way to fly. Alas, beggars can’t be choosy.