First piece of data that tells you the US economy is humming

OK, I promised you a barrage of data showing you how well the US economy is doing. Here’s the first piece of data: jobless claims. They came out today at 229,000, bringing the 4-week average down to 232,500. That’s the lowest level since April 1973- testament to how well the US economy is doing. Some brief thoughts below

I think it makes sense to start looking at the macro data with the initial jobless claims series since I said it is the one data series you should follow to know if the US expansion is in good shape. A year ago average jobless claims were 255,500, that’s more than 20,000 over the levels we see today. And what it basically means is that on a week-to-week basis fewer people are losing their jobs and getting unemployment insurance. Now this is an apples to apples comparison because not that much changes regarding who qualifies for jobless claims in a year’s time. So we know that the job picture today is better than it was a year ago.

And although I have not been highlighting continuing claims data of late, the numbers there tell the same tale.

Source: Bureau of Labor Statistics

Because average continuing claims are now 1.895 million and down from 2.056 million a year ago, we can confidently say that not only are fewer people losing their jobs, fewer people are unemployed. Let’s remember that eligibility for continuing claims was a big problem in making apples to apples comparisons during the Great Recession, as people remained unemployed long after their unemployment insurance ran out. That’s not a major driver of changes in continuing claims today. The 2016 continuing claims numbers are apples to apples comparisons to the 2017 ones that demonstrate an improving employment picture.

So as we await the jobs number tomorrow, we should be fairly confident that the results will show an improving employment picture, especially in the wake of a hurricane plagued report last month. Economists are now expecting a blockbuster 310,000 non-farm payrolls number combined with a stable 4.2% unemployment rate. I have doubts the non-farm payrolls number will be that high, so the market could be disappointed. Nevertheless, the overall trend is positive.

The only note of caution I would provide here is that the increase in non-farm payrolls is declining as the labor market tightens and that is consistent with an end of cycle dynamic.