Weekly claims for unemployment continue to show no sign of any unusual weakness in the labor market, as they continue their multi-year decline. Meanwhile, the number of people receiving unemployment insurance has fallen by 1.2 million, or 19% in the past year. These are significant facts that all but rule out a recession.
This chart shows unadjusted claims since the beginning of 2011 and their 52-week moving average, which remains on a slowly declining trend.
The number of persons receiving unemployment insurance has fallen by more than 5 million in the past three years. It was boosted far beyond what was typical in prior recessions by Congress' decision in mid-2008 to grant "emergency claims" benefits which greatly extended the time that an individual could collect benefits. Emergency claims have now fallen from a high of almost 6 million to 1.8 million today, and the number is still declining. Politicians think of emergency claims as a way to help those who lost a job, but economists think of them as headwinds to recovery since they reduce individuals' incentives to return to work and thus act like a headwind to growth. Emergency claims have good intentions, but in the end probably do more harm than good. So it's good that they have declined by almost two-thirds from their early 2010 high.
On the margin, the perverse influence of policymakers on the economy is diminishing, and that allows the natural forces of recovery more breathing room. I've learned to never underestimate the U.S. economy's ability to overcome adversity, and there is more reason every day to continue to follow that advice. The economy is very likely to continue to grow, and that's all that matters for investors in today's zero interest rate cash environment.