Jobless Claims: Trending Down But Not as Much as Hoped
Initial applications for unemployment benefits fell for the fifth consecutive week, but more Americans still filed jobless claims last week than economists expected. Data from the Department of Labor’s Bureau of Labor Statistics showed that in the week ended November 9, jobless claims dropped by 2,000 to 339,000 from the previous week’s upwardly revised 341,000. Comparatively, economists had forecast claims to drop as low as 330,000.
For weeks, claims data have been volatile thanks to computer problems in California and Nevada, as well as October’s 16-day partial shutdown of the federal government. Now, unemployment data is no longer as muddled from Washington’s manufactured political crisis, meaning that the Department of Labor’s data have given a much more accurate depiction of the trajectory of the labor conditions in recent weeks.
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 the past month, the four-week moving average has declined for the past two weeks. For the week ended November 9, the measure dropped to 344,000, a decrease of 5,750 from the prior week’s upwardly revised 349,750. 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 October 26, the total number of people claiming benefits in all programs was 3,907,671, a decrease of 53,536 from the previous week. There were 4,997,171 persons claiming benefits in all programs in the comparable week in 2012. Other unemployment data — which was mixed during and after the government shutdown — have begun to trend down once again, or to stabilize. The number of people continuing to receive jobless benefits remained unchanged at 2.87 million in the week ended November 2. Those individuals who have used up traditional benefits and are collecting emergency and extended payments fell by 37,000 to 1.33 million in the week ended October 26, the most recently available data.
The fact that initial claims have dropped for five straight weeks is evidence of growing strength in the labor market. But initial claims data — which serves as a proxy for layoffs — is only one part of the story; job growth has been comparatively much weaker. Excluding the effects that Washington’s political drama has had on jobless claims, the number of Americans applying for unemployment benefits have been trending down. But the falling applications has not been accompanied by increased hiring as is usual. Hiring has accelerated only modestly in recent months. Stepping back to look at the larger picture, the hole left in the jobs market left by the recession is still gaping; more than four million people have been out of work for more than six months and more than 11.3 million in total are looking for a job.
“We’re still seeing a very low trend of job destruction, but this is just one side of the equation,” said Raymond James chief economist Scott Brown told Bloomberg after last week’s jobless claims report. “The big issue for the job market over the last couple of years has not been job losses, it’s really been an issue of job creation, and that’s what we’re waiting for.”
What is needed for companies to increase hiring– many of which pared down their workforces as much as possible during the recession — is for Washington to work through political gridlock. “Until we get beyond these political and fiscal uncertainties, we’re likely to see this stop-and-start that we’ve had in the labor market,” TD Securities’ Millan Mulraine told Bloomberg. “Once we get beyond these issues, the labor market is likely to reflect a more buoyant economy.”
An increase in consumer spending, a metric that accounts for 70 percent of economic activity, would also help drive growth and boost hiring. But the relationship between job growth and consumer spending is a two-way street; as long as job creation remains low, consumers will likely be more inclined to keep purchases to immediate necessities. Of course, October’s Employment Situation Report, released last week by the Labor Department, showed much stronger job growth than expected.
Non-farm 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 in previous months. Even more encouragingly, the September gain was upwardly revised to 163,000 from 148,000 and August’s payroll additions were upwardly revised to 238,000 from 193,000. According to these new figures, average job creation over the past three months now exceeds a 200,000 pace.
Comparatively, the numbers contained in payroll processor ADP’s October National Employment Report had dismal portend for the more authoritative jobs report from the Department of Labor. According to Moody’s Analytics chief economist Mark Zandi, whose firm helps compile the payroll processor’s data, the party responsible for the month’s lower-than-expected gain of 130,000 jobs was clear.
“The government shutdown and debt limit brinksmanship hurt the already softening job market in October,” he said in the report. Similarly, economists polled by Reuters expected the Labor Department’s numbers to show employers added a meager 125,000 jobs last month. But improvements in the labor force participation rate and the number of long-term unemployed were lacking.
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