Jobless Claims Give Labor Market No Worries
Now, the narrative of the labor market recovery appears to be one of recovery. As payroll processor ADP’s monthly National Employment Report showed, employers added 215,000 workers to their payrolls in November — the strongest month for job growth in 2013. That job growth prompted Moody’s Analytics chief economist Mark Zandi, whose firm helps compile the data, to comment that, “The labor market remained surprisingly resilient to the government shutdown and brinkmanship over the treasury debt limit. Employers across all industries and company sizes looked through the political battle in Washington. If anything, job growth appears to be picking up.”
For months, the falling number of initial applications for unemployment benefits has confirmed that the employment situation was improving. Despite the spike in first-time jobless claims during the 16-day government shutdown in October, claims for unemployment benefits have trended down in 2013. In the week ended November 30, jobless claims decreased by a better-than-expected 23,000, falling to 298,000 from the previous week’s revised figure of 321,000, the Department of Labor reported Thursday. That figure not only surpassed expectations for 321,000 new claims, but was a two-month low.
“The labor market continues to improve,” Societe Generale economist Brian Jones told Bloomberg before the report was released. “Not only is the rate of layoffs slowing precipitously, more people are finding work.” He made similar comments after ADP’s report, noting that his firm was “optimistic on growth next year, continued improvement, further reductions in the jobless rate.”
Jobless claims provide the first look at the employment situation for any given month, but since the weekly figures can be volatile, economists use the four-week moving average to understand wider trends. After rising for most of October, the four-week moving average declined for nearly all of November. For the week ended November 30, the measure dropped to 2,796,500, a decrease of 32,500 from the preceding week’s revised average of 2,829,000. At the end of September, before claims were distorted by technical problems and the government shutdown, the four-week moving average sat at a six-year low of 305,000.
Improvements in the labor market are often hard to see on a week-by-week basis. In the week ended November 16, the total number of people claiming benefits in all programs was 4,096,901, an increase of 183,227 from the previous week.There were 4,959,201 persons claiming benefits in all programs in the comparable week in 2012. In general, other unemployment data, which was mixed after the government shutdown, has begun to trend down once again, or stabilize. The number of people continuing to receive jobless benefits dropped 21,000 to 2.74 million in the week ended November 23 — the fewest since December 2007.
But those individuals who have used up traditional benefits and are collecting emergency and extended payments rose by 45,300 to 1.35 million in the week ended November 16, the most recently available data. Before the recession began in December 2007, an average number of 320,000 initial claims were filed each week due to the normal churn in the job market. But when the economy tanked, U.S. firms began cutting millions of jobs and weekly claims soared. Overall, the U.S. economy lost 8.7 million jobs. Jobless claims — which serves as a proxy for layoffs — now match pre-recession levels, but job creation has yet to bring down the unemployment rate to a healthy number.
In 2006, jobless claims averaged around 300,000 and even temporarily dipped below that level. The low level of claims was accompanied by an average addition of 193,000 jobs per month during the first eight months of the year and an unemployment rate below 5 percent. Weekly claims for unemployment benefits rose slightly in early 2007, but remained near the low-300,000 until the end of the year.
However, job creation weakened, sinking to 93,000 in the first eight months of the year, an early sign of economic problems. Jobless claims are now trending down near the low 300,000 range. But, unlike in 2006, the unemployment rate is much more elevated, rising to 7.3 percent in October. That disparity arose because employers have not adding as many workers to their payrolls as they normally do after a economic downturn even though the economy should be adding jobs at a much faster rate. Yet, as Zandi’s comments indicate, the trend in job creation may be reversing.
The story growing out of the government’s official numbers and ADP’s private payroll data is one of improvement and growth, descriptors employed by prominent economists analyzing the current labor market. November was not only the strongest month for job growth in 2013, but ADP’s report also showed that employers added workers to their payrolls at the most robust pace in a year.
The first sign that job growth was picking up came in the Department of Labor’s October Employment Situation Report. Even though ADP’s October National Employment Report contained a warning authoritative jobs report from the Department of Labor, the numbers defied expectations. The report revealed that total nonfarm payroll employment rose by 204,000 in October, an indication that the 16-day shutdown of the federal government did not prevent employers from adding positions to their payrolls at a more robust pace than expected.
Not every job statistic had improved — the unemployment rate did tick up one percentage point to 7.3 percent, the labor force participation rate dipped, and part-time, low-wage jobs lead the gains — but there was evidence that an important trend in job creation was beginning to change. November’s government jobs report will provide further evidence of whether that change was temporary or the strengthening the labor market can be sustained. Economists expect the Labor Department’s jobs report to show the economy created 180,000 jobs last month and the unemployment rate fell to 7.2 percent.
Follow Meghan on Twitter @MFoley_WSCS