The numbers speak loud and clear in today’s weekly update of new jobless claims. New filings for unemployment benefits dropped a hefty 23,000 to a seasonally adjusted 381,000 last week. That’s just what's needed at this juncture to keep cyclical optimism alive and humming.
Indeed, this is the biggest weekly drop in new filings since late September. That brings the total of new claims down to the the lowest level since late-February. It could all evaporate next week and beyond, of course, but here and now the numbers look quite compelling. And momentum counts for something. Fortunately, it seems to be in our favor for this series. The four-week moving average is clearly falling right along with the weekly numbers.
Inevitably we’ll see some reversal in the weeks ahead. These numbers bounce around more than most. But if the trend can at least hold its ground, if not make further improvements through the end of the year and in early 2012, it’s going to get a lot rougher to argue that a new recession is coming. Yes, we’ll need to see some confirmation in other economic reports, but the revival in growth momentum that’s been conspicuous in a number of data series just received a strong vote of support with today’s claims update.
The reasoning here is that if the economy’s slipping, we'd see clues in new jobless claims. On that point, the trend speaks for itself. There’s always a danger of reading too much into one batch of numbers, but it’s hard not to notice that new claims have a decent record of dropping warning signs of things to come with the macro trend. The spring spike in claims, for instance, was a harbinger of the summer slump. It’s not unreasonable to wonder if the recent slide under the 400k mark is a sign of better times.
"It looks as if the U.S. labor market does not know how to spell the word euro contagion," says Cary Leahey at Decision Economics. "This is a good report ... adds to the sense that the job market continues to brighten, though very slowly."
Brian Jones, a senior U.S. economist Societe Generale, agrees but says there may be a joker in the deck just the same. "The labor market is improving. The numbers are moving in the right direction. You have to be careful because we’re around the Thanksgiving holiday and the Department of Labor has a hard time adjusting around floating holidays."
We'll have more context next week for deciding how hard that adjustment will be. November readings on retail sales are scheduled for release on Tuesday (Dec. 13) and industrial production on Thursday (Dec. 15). And, of course, another weekly update on new claims arrives next week as well. Meantime, it feels like there's a tailwind blowing.