In keeping with the slightly improving, slightly shaky trend that has characterized the measure of weekly jobless claims recently, Thursday’s report from the Department of Labor showed another uptick in initial claims for unemployment benefits. While the fewest number of workers in more than five years applied for first-time benefits in the month ended August 17 — averaging 330,500 per week — claims did increase by 13,000 to 336,000 last week. That gain was slightly higher than the 330,000 new claims economists had expected, and it drew jobless claims levels away from the near six-year low they hit the previous week.
Despite this minor jump, the general trend of jobless claims indicates that the labor market is modestly improving. Even more encouraging is the steadily declining moving average of claims. 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. Last week, that figure also declined, plummeting 2,250 to 330,500, the lowest level since November 2007.
Moody’s Analytics economists Ryan Sweet even told Bloomberg that there has been “legitimate improvement in the labor market,” noting that it is “more important to put the emphasis on the trend in claims, which remains favorable.”
Breaking the Labor Department’s data down further showed that twenty-eight states and territories reported a drop in new claims for unemployment benefits and 25 reported an increase. However, that statistic is reported with a one-week lag.
While weekly layoffs have declined steadily since the recession, much evidence has been served up in recent economic reports that suggest the labor market is gradually improving. However, hiring has not improved at a strong enough rate to bring the unemployment rate — which stands at 7.4 percent — down anywhere near the Federal Reserve’s target. These applications, which serve as a proxy for layoffs, have decreased significantly this year with the U.S. economy adding an average of 196,000 jobs per month since January.
The number of Americans continuing to receive jobless benefits increased by 29,000 to 3 million in the week ended August 10, which does not include the number of people receiving extended benefits under federal programs. Unemployed workers who have used up their traditional benefits and are collecting emergency and extended benefits dropped by about 51,800 to 1.5 million in the week ended August 3, the most recent data available.
Concerns for the health market were reignited after the Labor Department released the employment situation report for July, which showed that that payrolls added the fewest number of workers in four months. The United States economy not only created fewer than expected jobs in July, but the majority of the gains came in the low-wage retail and restaurant sector.
The 162,000-job gain did push the unemployment rate down to 7.4 percent, the lowest in more than four years, but a shrinkage in the labor force also contributed to the decline, making it less impressive.
Initial claims for unemployment benefits, which act as a proxy for layoffs, are a good measure of the health of the economy. Firings need to keep decreasing so that when the effects of the higher taxes and federal budget cutbacks fade in the second half of the year hiring can pick up.
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