Weekly Initial Jobless Claims have been creeping higher ever since marking that now infamous "four-year record low" just a few weeks ago. We warned then, and we raise the decibel now, that we are seeing the effects of European recession hitting home on our already vulnerable economy. The result should be renewed caution in employment, which seems to be developing, and stalling consumer spending.
Weekly Initial Jobless Claims actually slipped by 1,000 in the week ending April 21, falling to 388,000, but that was from a prior number that was revised higher (again), to 389,000, from 386,000. Economists were again surprisingly surprised by what we've been forecasting from before they were even giddy about nascent improvement in the labor market. The consensus view of economists was set at 375K for this week's number, according to Bloomberg's survey. We've noted in the past that economists understandably tend to have trouble seeing change on a weekly basis, and so historically, this forecast has tended to near mirror the latest preceding result.
The four-week moving average of jobless claims better reflects true trend, and that trend is troubling. The average increased by 6,250 in the latest measuring period, rising to 381,750. It's been creeping higher since marking that infamous low that had the major television network world news teams proclaiming great change and reporting on where the jobs were. Of course, we noted that less firing does not necessarily translate into more hiring, and that played out two days later with the monthly Employment Situation Report letdown. Perhaps we have their attention now.
The report reached the wire today in tandem with mostly poor economic news flow save a suspect housing data point, yet stocks are still celebrating on an Apple (NASDAQ: AAPL) high driven by the economy defying earnings heights of the technology leader. Employment services firms are mixed on the data, with the shares of Robert Half (NYSE: RHI) and Manpower (NYSE: MAN) appropriately lower while Korn Ferry (NYSE: KFY) treads water and Monster Worldwide (NYSE: MWW) soars 10% on its own earnings news (at the hour of scribbling here).
The latest data from the Department of Labor (DOL) showed insured unemployment stuck at 2.6% in the week ending April 14 (note the lag in this data point). Meanwhile, the total number of people claiming benefits of some sort, including through the benefit extensions program, dropped by 87,160 toward reaching 6.68 million poor souls. We remind the inappropriately enthused that besides that being an excessive count, it also misses all those long-term unemployed who are simply running out of benefits and falling off the radar.
Indeed, the trend is a deteriorating one in employment, with the public sector setting up to renew its leadership in layoffs after a recent short break. Reportedly, the U.S. Army may be next on the federal scale, based on the comments of a Pentagon official and the reality of budget cut driven necessity. On the municipal level, Detroit was the latest to flirt with the idea of layoffs, with its mayor talking about the millions in savings he seeks through privatization of services and the firing of some 2,500 folks. San Diego and Los Angeles are likewise looking at laying off more city workers, and they're not alone.
On the corporate front, Wall Street is reportedly set to set some bankers free due to the drying up of the deals market. The Wall Street Journal just reported that banks including Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), J.P. Morgan Chase (NYSE: JPM) and Morgan Stanley (NYSE: MS) are getting ready for a new round of job cuts. The trouble should spread soon enough into the retail store marketplace and other service providers, before infecting manufacturing again if the global environment breaks as I see it (read poorly).
We're just a week off now of the next Employment Situation Report, though perhaps still months short of when Europe really starts to impact our labor market due to the 20% of exports we ship there, its impact on the emerging world and the lag of the employment indicators. Stay tuned folks, as it's getting hot in here…
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.