Emergency Unemployment Expiration Dominates Jobless Data
If initial claims for unemployment benefits defined the whole labor market story, then the narrative of the jobs recovery would be easy to summarize: Progress is steady. Data released by the Department of Labor’s Bureau of Labor Statistics Thursday showed that even though jobless claims ticked up by 1,000 applications to 326,000 in the week ended January 11, jobless claims levels remained near a six-week low and fell below analyst expectations for 330,000 new applications.
The drop is further evidence of the resilience of the U.S. labor market and a sign that while job creation was not strong in December, business remain confident enough to keep workers this month, even if they were not inclined to increase payrolls last month.
“It’s reassuring,” John Hancock Financial Services chief economist William Cheney told Bloomberg. “After the December jobs report everybody was pretty nervous. This is a number that makes it more likely December was a fluke.” Last week’s numbers also indicate that the volatile hiring and firing patterns that characterize the holidays and influence jobless claims numbers have come to an end. Jobless claims, a proxy for layoffs, are once again trending near the average pre-recession level of 300,000.
Earlier in January, the Bureau of Labor Statistics announced that the U.S. economy had created a fewer-than-expected 74,000 jobs in the month of December, prompting some speculation that the growing momentum evidenced by the labor market in the previous two months was at an end.
Yet other economists, including Moody’s Analytics chief economist Mark Zandi, argued that the meager payroll additions were not a harbinger of a changing employment trend, Bloomberg reports. Instead, they consider them an anomaly that will be wiped away by later revisions. While evidence to support Zandi’s assertion will only be available when January’s numbers are released next month, the downward trend in first-time jobless claims suggests there have been no major changes in the labor market, at least in terms of layoffs.
But there is further evidence that trends in the job market remain stable — the four-week moving average of jobless claims also dropped last week. 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. In the week ended January 11, that average decreased by 3,750 claims to 331,500 from the previous week’s downwardly revised average of 335,250.
Trends in jobless claims, a leading economic indicator, only offer indirect clues about the pace of hiring. “The level of claims is now consistent with a healthy labor market turnover,” BNP Paribas U.S. economist Yelena Shulyatyeva told Bloomberg. “But companies are still reluctant to hire and invest, so that’s the real issue. For the economy to accelerate, we need to see acceleration in hiring.”
There are other data to consider, as well. In the week ended January 4, the total number of people claiming benefits in all programs was was 3,706,087, a decrease of 1,003,734 from the previous week. While that drop was the most significant recorded in months, its size was due to the expiration of the extended emergency benefits program. No longer are more than 1 million long-term unemployed Americans who have used up traditional benefits able to collect emergency and extended payments.
A measure to extend emergency payments for long-term unemployed Americans for a period of three months passed a key Senate procedural hurdle on January 6, but the Senate then failed to advance the plan as lawmakers disputed how to cover the cost of the benefits and how long they should continue. Thursday’s report was the first to show that 1.35 million unemployed Americans lost emergency benefits.
While the overall number of people claiming unemployment benefits declined, those continuing to receive jobless benefits climbed by 34,000 to 3.06 million in the week ended January 11, the highest number reported since July.
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