New filings for jobless benefits fell again last week, offering another statistical talking point to argue that the dramatic surge in new claims for the week through November 11 was a temporary effect from Hurricane Sandy. Since then, claims have dropped for three consecutive weeks. The overall decline in the last three reports is substantial, pushing last week's claims data down to the range that prevailed before the storm hit, albeit on the high side of the pre-storm range. But for now, there's quite a bit more confidence for asserting that the claims numbers again suggest that slow growth for the labor market remains a reasonable outlook.
Exhibit A is last week's drop in new filings for unemployment benefits, which retreated by 25,000 to a seasonally adjusted 370,000, or slightly below the four-week average for the week ahead of the sharp increase in claims due to the storm. As today's press release notes, the biggest drop last week among the states was a 24,000 slide in New Jersey, which—according to the Labor Department—reported "fewer storm related claims, primarily from the construction, transportation and warehousing, manufacturing, trade, and accommodation and food service industries." By comparison, the biggest state increase was 5,000 in Wisconsin.
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Turning to the unadjusted numbers on a year-over-year basis—a more robust measure of the trend for this leading indicator—we find that new claims across the U.S. generally continue to drop relative to year-earlier levels. For the third week in a row, weekly filings are falling on an annual basis, which amounts to a return to the prevailing pre-hurricane trend of the past three years. That's a strong signal on the side of optimism for thinking that the economy will continue to create new jobs on a net basis.
What's not to like? The unadjusted annual decline remains modest, with claims falling by roughly 6% last week vs. a year ago. The pre-storm trend was closer to a 10% drop. Nonetheless, the fact that new claims are again trending lower, albeit at a slower pace, is encouraging.
It's still too soon to argue that the claims data has returned to "normal." But the speculative cries of recent weeks from some corners that the early November surge in new filings was a sure sign that the labor market is collapsing is all but dead with today's report. Yes, there are other demons to worry about when it comes to assessing jobs growth, starting with the low pace of new hires. But arguing that the claims numbers clearly point to trouble continues to fade as a compelling narrative. That's no guarantee that we won't run into trouble in the weeks ahead, but based on the numbers in hand there's no smoking revolver here.