Are We Due for Another Surge of Bad News in Labor Market?

It's too soon to declare that the worst of the recession has passed, but it's also premature to dismiss the idea. We are, in short, in a never-never land of waiting and watching, and this game may roll on for many a moon.

To help pass the time, we're watching the data as it comes in, including initial jobless claims. As we've written, this is one of several metrics that may offer clues about when the business cycle reaches a trough. Like any one statistic, it can't be fully trusted, and so we must look to a range of data points. But history suggests that as single measures of broad economic trends go, this one's unusually useful in trying to peer into the future, or so it's been in the past.

With that in mind, we turn to this (Thursday) morning's update on new filings for jobless benefits. As the chart below shows, the encouraging drop through the week of April 11 has since given way again to the forces of darkness via last week's seasonally adjusted rise of 27,000 new filings. But the hope that we've seen a top isn't lost yet.

click to enlarge

History suggests that initial claims will top out concurrently or perhaps even slightly ahead of the recession's formal bottoming. Yes, we must look to other signals for context before we make any definitive conclusions. For the moment, the jury's still out, but the good news is that it's not yet clear that the recession's getting worse, or so the trend in initial jobless claims suggests.

The question is whether we're due for another surge in bad news for the labor market? The economy is still too precarious to rule out the possibility. On the positive side, despite the robust rise in claims last week, the trend in the chart above still doesn't preclude the possibility that we've seen a peak. Deciding if in fact that's true will take another month or two of data. Meanwhile, evidence that we're not peaking requires only one weekly surge skyward.

Comments

[mcl_mixer:]

"The question is whether we're due for another surge in bad news for the labor market?"

Wait until GM, Chrysler, and most of the auto suppliers file for bankruptcy in the next month or so. We're looking at job losses and/or pay and benefit cuts for millions. It will snowball through the whole economy, not just the Rustbelt. The worst is still to come.

Apr 23 11:36 AM

[Robin Heide...:]

Job losses are clearly beginning to moderate; the increase in unemployment will slow from .3 and .4 per month to perhaps .2. The job market is still deteriorating, however. We will be at or near 9% in the May report based on claims data to date. Assuming .2 per month through the end of the year you get to 10.4%.

There could be a another leg down to claims but I doubt it. The massive monetary stimulus will kick in the second half of the year at the very moment the federal spending stimulus kicks in.

I see a cycle peak of 10.5 to 11% followed by a tepid recovery. I think we will still be in double digits at the end of 2010.

Apr 23 01:12 PM

[Mad Hedge F...:]

Yup.

Apr 23 02:18 PM

[Jasper M:]

"Obama won't let that happen because he needs union votes in 2012"
Homikoglu, Please! The only way he can prevent it is to "blink' re Chrysler, and later GM . . . which would utterly destroy his credibility with everyone But the unions.

Apr 23 03:26 PM

[Dave Wrixon:]

Your comments are contradictory.

Yes, job losses are about adjustment to new realities. Where the economy is screwed up it needs to correct itself by the elimination of redundant or inefficient production capacity.

However, you then go on to suggest that preserving relics like GM and Chrysler are essential the health of the economy. I sorry but part of the healing process is learning to let go. And saving those jobs will not save Obama's electoral arse.


On Apr 23 12:33 PM Cetin Hakimoglu wrote:

> Obama won't let that happen because he needs union votes in 2012,
> and 15 billion or so in extra bailout money is peanuts, anyway.<br/>
>
> Job loss just not a big deal though because the jobs being lost are
> inefficient.. The dynamics of the labor market are changing in that
> more work is being outsourced or insource, which isn't tracked by
> the US govt.
>
> On Apr 23 11:36 AM mcl_mixer wrote:

Apr 23 03:35 PM

[ArkansasAngie:]

My entrepreneur radar is set to sensitive. From a historical perspective times of upheaval, like now, present opportunities as old technology/business models get struck down and new little guys are able to make new technology and business models.

Apr 23 07:19 PM

[Manifestor:]

GM, Chrysler bankruptcy doesn't necessarily have to result in big job losses, certainly not in millions as some earlier 'commentor' wrote. Bankruptcy proceeding will be more oriented towards financial dealings with bond holders, creditors, reduction in retirement benefits etc.

Apr 24 07:48 PM