Jobless Claims Hit Three-Month Low, But February Job Growth Was Likely Weak
Juxtaposed against the dismal picture of February economic activity painted by several recent reports, data released by the Department of Labor’s Bureau of Labor Statistics on Thursday showed that initial applications for unemployment benefits declined by 26,000 new claims to a seasonally adjusted 323,000, the lowest level recorded since the end of November and a strong enough decline to reverse the previous week’s jump. For economists considering whether the exceptionally cold weather has been responsible for the deceleration of economic growth in recent months or whether more structural issues are at fault, the jobless claims data reflected strength in a labor market that has been hobbled by the frigid temperatures experienced by much of the country in recent weeks.
Economists say any claims figure below 350,000 indicates moderate job creation. But it is important to remember that employment growth in January was far less than expected and far less than is needed to significantly reduce the high level of unemployment.
What is clear is that initial claims for unemployment benefits — which serve as a proxy for layoffs — paint a picture of a strengthening and resilient labor market. The general downward trend of jobless claims offers a sign that even though job creation was not strong in December and almost equally weak in January, businesses remain confident enough to keep workers even if they were not inclined to increase payrolls significantly. 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, or at least, the labor market situation is not worsening.
Confirming that thesis is the fact that the underlying trends in jobless claims remained positive in the past week, as well. 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. According to Mesirow Financial chief economist Diane Swonk, it is “the trend in employment that matters.” In the week ended March 1, the four-week moving dropped to 336,500, a decrease of 2,000 from the previous week’s downwardly revised average of 338,500.
“The overall trend here is positive and consistent with a gradually improving job market,” TD Securities strategist Gennadiy Goldberg told Bloomberg. “We have stemmed the bleeding in layoffs, what remains is to add jobs.”
Plus, the number of people continuing to receive unemployment benefits after an initial week of aid fell 8,000 to 2.91 million in the week ended February 22, the most recent available data. That was the lowest level recorded since December, as continuing claims data have been elevated in the past several weeks.
December, January, and now February have seen levels of job creation far too low to dig the U.S. economy out of the crater in the labor market created by the financial crisis and Great Recession. With the release of payroll processor ADP’s National Employment Report for the month of February, economists were given another sign that employment gains were weak in the first months of the year: U.S. private-sector employers added just 139,000 jobs to payrolls, a figure well below the twelve-month average, according to ADP Chief Executive Carlos Rodriguez. As in previous months, Moody’s Analytics chief economist Mark Zandi, whose firm helps compile the payroll processor monthly tally, blamed frigid temperatures, not underlying economic trends, for the poor growth.
“February was another soft month for the job market,” he said in the report. “Bad winter weather, especially in mid-month, weighed on payrolls.” Cold weather across much of the United States has curtailed residential construction and home sales, hobbled manufacturing output, and damped retail sales, especially at car dealerships. Zandi told CNBC that “the very cold weather is playing havoc on all the economic data.” But some economists argue that larger forces may be at play. Factors like rising mortgage rates could be stifling economic growth, which is expected to accelerate this year due to newfound consumer spending strength created by rising household wealth and decreasing debt.
ADP’s report is typically seen as a precursor to the Labor Department’s employment situation report. The more authoritative numbers will be released on Friday, giving economists a much clearer idea of the state of the labor market. Analysts expect the data to show employers added 152,000 new jobs to payrolls last month. Of course, in both December and January, results significantly missed forecasts, fueling the debate over whether low job creation was the result of slowing economic growth or poor weather.
Many recent economic reports have flashed warnings about the health of the U.S. economy. “Weather” was referenced 119 times in the Federal Reserve’s beige book report on economic activity across the country. While that is by no means excessive for a document with a word count running in the tens of thousands, its use confirms what many economic reports have already indicated: that frigid temperatures caused U.S. manufacturing output to record its biggest decrease in more than four-and-a-half years in January; kept job creation weak in December, January, and likely February; contributed to a slowing in consumer spending in the past two months; and handed residential construction a hit, with January housing starts dropping to the lowest levels experienced in almost three years.
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