The encouraging economic numbers for the U.S. in recent weeks have been marred by two sore spots: a sharp rise in new jobless claims and a worrisome deceleration in the growth rate for disposable personal income (DPI). But today’s release on new filings for unemployment benefits suggests that we have one less threat to worry about.
Jobless claims dropped by a hefty 42,000 last week to a seasonally adjusted 338,000. And not a moment too soon. Claims have surged recently, reaching the highest level since March for the week through December 14. But quite a lot of the increase was reduced in today’s report. As a result, claims have slipped to the lowest level since late-September. It’s still unclear if this leading indicator will resume the downward trajectory that was in force until a few months ago. But for today at least we have a new reason to think that the economy’s capacity for creating jobs at a modest pace is intact.
It’s especially reassuring to see the year-over-year trend in claims again reflect a decline after two straight weeks of increases. The change suggests that the jump in claims numbers of late have been tortured by short-term volatility of minimal relevance for reading the business cycle’s tea leaves.
But that leaves us to ponder the troubling weakness in the rate of growth for DPI. As I noted on Monday with regards to the November income report: "DPI’s annual change continues to slump, rising only 1.5% last month vs. a year ago. That’s a sharp deceleration from October’s 2.6% year-over-year rate. It’s also the second-slowest pace of growth this year."
It’s unclear if this too is noise, or the start of something darker. Exhibit A for leaning toward the former assumption is the wide array of robust numbers across the macro spectrum. Indeed, the economic trend continues to reflect a low level of business cycle risk through November. The generally bubbly overview implies that DPI will again join the party. But that’s a purely speculative projection at this stage, and will remain so until we see more data on income, starting with the next update: the December report, scheduled for release on January 31.