The government's employment report for September that's theoretically due for release tomorrow will probably remain a mystery this week, courtesy of the government shutdown. In contrast, today's weekly update on jobless claims has been spared Washington's axe of fiscal mayhem, at least for this week. New filings for jobless benefits inched higher by 1,000 in today's report, settling at a seasonally adjusted 308,000 for the week through September 28. Apparently some corners of the Labor Department are better than others at dispensing economic numbers when Congress is suffering from a fiscal hissy fit. In any case, the key takeaway in the data du jour is that claims continue to bump around at levels within shouting distance of a seven-year low. An even stronger message in today's release is the news that the year-over-year rate of decline is still running at relatively deep levels, which is an unequivocally bullish sign for anticipating the near-term trend for the labor market.
Indeed, last week's claims dropped 16% vs. the year-earlier level. This relatively large decline is no anomaly. In each of the past four weeks, claims have been sliding 15% to 20% on an annual basis-a substantially deeper shade of red than we've seen until recently.
The acceleration in the annual rate of decline implies that the economy's capacity to mint new jobs may be poised to improve in the months ahead. Or is this all a head fake? It's possible that US companies are laying off fewer employees these days because they've already cut staff to the bone in recent years and so there's nothing left to cut without damaging core operations. The alternative view is that layoffs are slowing because business activity is improving, which suggests a higher demand for workers going forward.
As usual in real-time analytics with macro matters, the truth (although it will set you free) unfolds at its own slow pace and so definitive interpretations of what's happening remain a work in progress for longer than the crowd would prefer. Nonetheless, there's a bit more support today for thinking optimistically on the labor market's outlook in the months ahead. In fact, the biggest challenge at the moment has nothing to do with the data per se. Rather, it's politics in Washington that's creating havoc by threatening statistical blindness.
As we write (mid-morning New York time), there's still no sign of a compromise that would end the government shutdown. The good news is that if we're destined to go dark on economic data in the days ahead, we're at least going into the tunnel on a high note via today's claims numbers.