The stimulus checks may be propping up consumer spending, at least temporarily, but the job market is still weakening.
Initial jobless claims jumped to 404,000 mark last week, up from 388,000 the week previous the Labor Department reports. That's only the second time the 400,000 mark has been passed on the upside in many a moon, the previous instance coming this past March 29 when claims reached 406,000.
As our chart below shows, the trend is clear: new filings for unemployment benefits continue running higher. It's not clear that the stimulus checks will deliver salvation. There are many negatives weighing on the economy, from rising energy prices to the unwinding of various debt burdens, and those ills aren't about to evaporate next week because consumers are receiving checks in the mail for $600 to $1,200.
Reading the writing on the economic wall, Washington is now talking about a second stimulus package.The political inclination to act is understandable, but at some point the correction will have its way. Trying to keep the growth cycle alive indefinitely isn't plausible, nor is it possible--or even healthy. Yes, the past 20 years suggests otherwise, but the pain has simply been pushed forward.
Strong growth ultimately arises from ashes of recessions--a harsh but ultimately accurate fact. Artificially keeping the growth alive in order to avoid recessions risks nipping future growth in the bud. Again, politics calls for no less, but in the end it's not obvious that letting the political mindset run the show is the best long-term strategy for the man in the street. That won't stop Washington from moving heaven and earth to try and re-engineer a more comforting outlook, although the patient may not respond as expected this time.