Initial jobless claims fell again last week, touching a new four-year low and signaling that the labor market will continue growing in the foreseeable future. For the week through March 31, new filings for unemployment benefits dropped 6,000 to a seasonally adjusted 357,000.
Last week's decline was no quirk, considering that the four-week moving average of new claims also dipped to a new four-year low. There's no seasonal issue clouding the trend either. Unadjusted claims are 12% below last year's level, which is to say that the annual decline remains in the 10%-15% range of decrease that's prevailed for the past 12 months.
The persistence of the decline is notable and therefore encouraging. Indeed, falling jobless claims remains on the short list for thinking optimistically about the economy for the near term. A falling rate of new filings tells us that the higher pace of job creation in recent months has legs. Yesterday's employment report from ADP said as much and tomorrow's payrolls update for March from the government is likely to bring a fresh dose of confirmation. But as I wrote earlier today, I'm still anxious about the decelerating growth rate in personal disposable income. An expanding labor market should eventually stabilize if not reverse the slowdown in income, but the clock is ticking. If income is stagnant-and it is after adjusting for inflation-there's likely to be trouble down the line, short of a new borrowing binge by consumers. Anything's possible, of course, but after getting burned by the Great Recession one should be skeptical that consumption growth can be sustained without a commensurate rise in personal income. In that case, job growth may be vulnerable later this year.
But such worries aren't likely to be an immediate problem when the economy is generating a decent run of jobs. And if tomorrow's payrolls update surprises on the upside, it'll be a bit easier to think that income growth will soon rise once more.
Today's data certainly inspires modest confidence for expecting that somehow it'll all work out. "The labor market is going to continue to gradually heal, though we have a long ways to go," Ryan Sweet, a senior economist at Moody's Analytics, tells Bloomberg. "The economy is pulling up pretty well given the headwinds we're seeing from Europe."
If the optimism is misplaced, we'll soon see signs of it in initial claims numbers. But so far, the trend remains our friend. But let's not minimize the stakes at this juncture: job growth has to stay robust if not accelerate higher, otherwise all bets are off. The past two springs have hit speed bumps that threatened to derail the economy. At the moment, that risk is minimal; good thing too, since a third tumble could push the business cycle over the edge this time.