Labor Gains: Continuing Jobless Claims Drop
In the week ended November 23, the Department of Labor reported that jobless claims — a proxy for layoffs — fell by 10,000 to 316,000 from the previous week’s revised average of 339,250. In fact, that drop was the sixth decline in jobless claims recorded in the past seven weeks. It was also a far greater decline than expected. Economists polled by Dow Jones predicted 330,000 new claims.
The numbers were released a day early because of the Thanksgiving holiday. Thanks to the holidays, November and December claims numbers can be volatile — this therefore complicates the Labor Department’s attempts to seasonally adjust the data.
Initial applications for unemployment benefits unexpectedly fell to a two-month low. For weeks, claims data were 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 the Department of Labor’s data has given a much more accurate depiction of the trajectory of the labor conditions in recent weeks.
“If claims can trend at anything like this level through the inevitable noise of Thanksgiving and then the holiday season, that would mark a real improvement on the pre-shutdown period and would be consistent with stronger payroll growth,” Pantheon Macroeconomics economist Ian Shepherdson wrote in a note acquired by ABC News.
As Shepherdson suggests, the trend in jobless claims is a strong one. Since the partial shutdown began on October 1, when political dysfunction caused unemployment applications to spike, numbers have improved. New claims have dropped by 57,000 from the high recorded in the week of October 5. 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 has declined for nearly all of November. For the week ended November 23, the measure dropped to 331,750, a decrease of 7,500 from the prior week’s upwardly revised 339,250. 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 9, the total number of people claiming benefits in all programs was 3,913,729, an increase of 38,437 from the previous week. There were 5,183,962 people claiming benefits in all programs in the comparable week in 2012. In general, other unemployment data, which were mixed after the government shutdown, have begun to trend down once again, or stabilize.
The number of people continuing to receive jobless benefits dropped 91,000 to 2.78 million in the week ended November 16, the fewest since January 2008. But those individuals who have used up traditional benefits and are collecting emergency and extended payments rose by 3,400 to 1.31 million in the week ended November 9, the most recently available data.
The jobless claim numbers are “indicative of the kind of job growth we’ve been getting over the last couple months,” Bank of America senior U.S. economist Michael Hanson told Bloomberg Businessweek. “We’ve been moving forward but we’re not at a robust pace yet.” By moving forward, he means that application levels indicate that employers have ended the long cycle of elevated layoffs that characterized the 2007-2009 recession.
While U.S. employers are not boosting hiring, they are not cutting many workers, either. The improving trend in claims data does suggest “ongoing labor-market improvement,” as TD Securities strategist Gennadiy Goldberg said in September. But while “companies are lean and mean,” the “hiring that usually goes along with claims like these just isn’t happening,” MFR chief economist Joshua Shapiro told Bloomberg. “The claims data are flashing a much stronger signal” than other data such as payrolls, he said.
The fact that initial claims have dropped for six straight weeks is evidence of growing strength in the labor market. But initial claims data are only one part of the story — job growth has been comparatively much weaker. Stepping back to look at the larger picture, the hole left in the jobs market by the recession is still gaping: More than 4 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.
Still, October’s Employment Situation Report showed much stronger job growth than expected. Nonfarm payroll employment rose by 204,000 in October, an indication that the 16-day partial 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. But that is only one month’s data, and employment remains well below the peak level seen in December 2007. Plus, the headline unemployment rate ticked back up to 7.3 percent last month.
“We’re still seeing a very low trend of job destruction, but this is just one side of the equation,” Raymond James chief economist Scott Brown told Bloomberg earlier in November. “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.”Follow Meghan on Twitter @MFoley_WSCS Don’t Miss: Will Americans Have the Confidence to Spend Freely This Holiday Season?