Jobless claims were reported as 521,000 on a seasonally-adjusted (SA) basis for the week ended October 3. This is the lowest reported figure for initial claims since January 3. The data came in lower than expectations and was matched by a drop in continuing claims to 6.04 million.
While both numbers are still high by historical standards, the trend has been down since March for initial claims and June for continuing claims. The widely followed 4-week averages are at their lowest levels for initial and continuing claims since January and April respectively.
Of course, the unadjusted numbers have been in the 400s since the beginning of August. Because of the downward drift in initial claims, I do not expect them to tick significantly higher despite the usual seasonal pattern.
Overall, that means the employment market is weak enough to contribute to rising unemployment rates and job losses for the next few months. However, as the trend is toward lower numbers, I would anticipate this to end in Q1 at the latest. But, because of increasing labor force participation, I expect the base unemployment levels will continue to rise. This fits in with my general view of a weak recovery vulnerable to exogenous shocks.
Update: One more thought – we have what I would describe as a structurally high private unemployment level. At a minimum, we could change our automatic stabilizers to add more stimulus as depending on the severity of the downturn. For instance, it would be a good start to extend unemployment benefits to 39 weeks automatically if the rate of unemployment rises more than 1% over six months/one year and to 52 weeks if it rises more than 1.5% over that time frame.
As an example, Germany has a more robust system of automatic stabilizers and it is thought this has helped them recover from recession faster. We might benefit from some kind of automatic but prudent counter-cyclical stimulus.