Thursday morning's update on new filings for unemployment benefits suggests that the improving trend since the spring for this series remains intact. Initial claims for jobless benefits dropped 33,000 for the week through October 3, the Labor Department reported. That cuts initial claims to the lowest level since this past January, as our chart below shows.
More good news comes in the way of continuing claims, which dropped to 6.04 million, the lowest level since April.
Good news, to be sure, in terms of the general trend. The bad news is that both of these numbers are still elevated in absolute terms to an extent that reflects broad economic weakness. And signs of a quick turnaround are still scant. Repeating our long-running mantra: the labor market's recovery will be unusually slow in the months and quarters ahead and so we must be cautious in expecting too much too soon in terms of an economic recovery worthy of the name on Main Street as well as Wall Street. For an economy that's heavily dependent on consumer spending, which in turn relies on a robust labor market, the U.S. faces a headwind of some magnitude.
That said, the recovery process, albeit a weak and tentative version, remains in play. The general decline in initial jobless claims has been telling us so for months. As we discussed back in March, this metric is worth watching for its predictive powers, as it relates to the finale of recessions according to the economic history. So far, it's hard to argue otherwise.
The good news, however, may already be baked into equity market prices, as we suggested Wednesday. Meanwhile, there is the great unknown about the future path for the labor market proper, which promises (threatens) to be the overwhelming subject going forward, even if the crowd isn't yet fully focused on this fate.
In fact, this is hardly a new subject in the dismal science, as the trend in job creation has been discouraging for 25 years. Five years after the end of the 1981-82 downturn, nonfarm payrolls jumped by more than 16% (a gain of 14.6 million jobs). Five years after the end of the 1991 slump, payrolls were higher by 9.5% (a rise of 10.4 million). In the wake of the 2001 recession, nonfarm jobs advanced by less than 3% (or up by 3.8 million) after five years.
The fading power of the U.S. economy to generate new jobs in absolute and relative terms in post-recession periods over the past generation is well documented. Call us crazy, but there's nothing on the economic scene at the moment that suggests this trend is about to change for the better. In fact, it's likely to get worse.
Perhaps it's time to acquaint ourselves with the finer points of a jobless recovery. Let's hope not, but if that comes to pass, a round of rewriting the economic and financial yardsticks and rules of thumb as we know them may be looming.
In the meantime, today's initial jobless claims tell us that the recovery in October 2009, whatever that ultimately means, is alive if not necessarily kicking. In fact, we're confident that the inflation-adjusted third-quarter GDP number will be modestly positive when the initial estimate is released on October 29. If so, that'll be the first expansion in real GDP since 2008's second quarter. Unfortunately, the practical implications in a revival of GDP this time threaten to be quite unsatisfying for the immediate future.