It’s still touch and go with weekly jobless claims, and it probably will be for some time. We’re in a transition phase, or so it seems. The question is what will be the outcome? As we write, we’re inclined to think the odds are evenly split between a resumption in the near future of the general decline that’s been in force vs. a change for the worse.
We’ve been writing about what appears to be a pivotal test for the labor market. After nearly a year of declining jobless claims, we’ve been wondering if the favorable winds have shifted in the early weeks of 2010, as we discussed here and here, for instance. Depending on the week, our concerns look inspired or naive.
Today’s update reports a hefty rise of 31,000 new filings for unemployment claims for the week ending February 13 (this and all jobs numbers reported here are seasonally adjusted figures). As our chart below shows, the uptick looks discouraging at this point, more so than usual. Relative to the linear trend over the past year, it’s getting harder to dismiss the idea that the recovery wind for the labor market has run out of steam. (Click to enlarge)
It’s still too early to say for sure what’s going on with jobless claims, which are a valuable resource for anticipating the larger economic trend. For one thing, this data series is notoriously volatile from week to week. As such, the latest data point is still well within the range that would be consistent with an ongoing decline. At the same time, it’s also true that the trend may be setting us up for a period of sideways action, with jobless claims stuck in a range of, say, 450,000 to 500,000 for an extended period. If so, that spells trouble for expecting a robust rise in nonfarm payrolls any time soon. Our outlook for net job growth has been muted for some time and perhaps we'll have to further reduce our expectations, depending on the numbers that arrive in the coming weeks.
Meantime, we’re not encouraged by the latest update on so-called continuing claims for jobless benefits, which is the tally for those who’ve been previously collecting unemployment checks. The trend on this measure has also stalled, as our second chart below illustrates. The latest number puts the continuing claims total at 4.563 million for the week through February 6. That’s unchanged from the previous week and about 2 million higher than what would prevail in a healthy economy. We're still a long way from home.
Progress, in short, remains in some peril in the formerly recovering labor market. The problem, of course, is that the recovery so far has been virtually all about slowing the bleeding. The second phase of net job creation has yet to begin, and based on today’s numbers there’s reason to wonder if the day of salvation is further down the road than we thought a few months back.