Is This What Modest Job Growth Looks Like?

After hitting a five-year low the previous week, the number of American workers filing new applications for unemployment benefits increased in the week through January 26, hitting levels consistent with modest job growth.

Last week, the advanced figure for seasonally adjusted initial claims rose by 38,000 to 368,000, the Labor Department reported on Thursday. The jump reflects the largest number of new claims since early November, when unemployment figures rose as a result of Superstorm Sandy.

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The number of new claims rose more than expected; economists polled by Reuters had forecast an increase to 350,000 claims.

Claims, a measure of layoffs, have been volatile in the month of January, but the number of claims still remains below the 400,000 level, which many economists see as the point between a labor market that is recovering or declining. Unemployment statistics are often inconsistent in December and January as payroll changes often happen at the end of the year. The more reliable measurement of unemployment claims – the four-week moving average, which softens week-to-week volatility – rose by only 250 to 352,000…
As the number of new claims remained below the 400,000 mark, Thursday’s unemployment report indicates that the labor market is improving modestly. However, for the month of December, the unemployment rate stayed at 7.8 percent, a level that is considered historically high.

Continuing claims for benefits, those drawn by unemployed workers for more than a week, rose by 22,000 to 3,197,000 in the week ended January 19; these figures are released with a one-week lag.

Thursday’s worse-than-expected jobs report followed the lowest reading of consumer confidence in more than a year. The Conference Board reported earlier this week that Americans are concerned about the increases in payroll taxes and the labor market. Economists are worried the tax hike could lower consumer spending because it means workers will be taking home smaller paychecks. As part of Congress’s last-minute deal to avoid the fiscal cliff earlier this month, lawmakers agreed to let the temporary cut in Social Security withholdings to expire, pushing the tax back up to 6.2 percent from 4.2 percent.

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