Jobless claims stalling at a high plateau above 450,000
Let me wade back in to the jobs data this week. First, this morning we saw that ADP reported non-farm private employment had increased a seasonally-adjusted 55,000 in May. This comes after the upwardly revised 65,000 increase in April and is the fourth consecutive gain in employment.
We also got another peek at jobless claims data.
In the week ending May 29, the advance figure for seasonally adjusted initial claims was 453,000, a decrease of 10,000 from the previous week’s revised figure of 463,000. The 4-week moving average was 459,000, an increase of 1,750 from the previous week’s revised average of 457,250.
Weekly jobless claims have dropped significantly from peaks a year ago. So, by every measure the economy has recovered from its deep recession. The question is what is going to happen going forward and the data do not make this clear. For example, average jobless claims bottomed at 448,000 for the week ended March 27th, 9 weeks ago. We have drifted every so slowly higher since then. Moreover, continuing claims, have also drifted a tad higher, having bottomed sometime in April. There are also an additional five million people on extended benefits.
Clearly, the drop in claims has stalled. But, we have seen this pattern previously in this recovery. It does not mean claims have bottomed permanently. We will just have to see. Looking back in this recovery, claims peaked at an average of 643,000 in April 2009, about 14 months ago. There was a similar rise in jobless claims from July 2002 when claims hit 385,000 only to rise to 426,000 by June 2003. If we followed this trend, jobless claims could continue at their present elevated level until Feb 2011.
In any event, the employment report is due out tomorrow with an expected 400,000 census workers to add to the 140,000 private sector jobs expected. The jobless claims data show that the onus for increased employment comes now not from reducing employment market churn but from increasing hiring. Claims were only at the 340,000 level when the recession began in December 2007. So we have quite a ways to go before we can call the labour market anything but weak. Jobless claims may be hitting a(n elevated) plateau so that to the degree we are to see further improvement in the labour market it will come entirely from new hiring.