The jobless claims came out again today and the numbers were weak. This is the third week in a row of elevated claims above 380,000 and the 4-week average is now also above that mark. A lot of people have been pointing to weather related catch up as a reason for over-performance in the months prior leading to under-performance now. Another meme that has currency is that the seasonal adjustments have been distorting things. I would give more credence to the former phenomenon than the latter. Notice the bump up in average claims last year at this time from the chart below as well. But no matter the numbers point to a bad employment report for April.
The US Department of Labor reported that "in the week ending April 21, the advance figure for seasonally adjusted initial claims was 388,000, a decrease of 1,000 from the previous week’s revised figure of 389,000. The 4-week moving average was 381,750, an increase of 6,250 from the previous week’s revised average of 375,500."
I think the U.S. is due for a weak second half. I see GDP growth coming in slightly below 3% this quarter followed by weakening but still positive growth. At that point the so-called fiscal cliff will loom large. You won’t get a recession in the US until you get fiscal retrenchment, which could occur later this year or early in 2013. Then you’ll get a situation like the one in the UK.
As for why this matters, the US is still in a balance sheet recession despite some incipient releveraging. Here are two Gallup charts that point to what I mean. The first set of charts shows you that financial comfort in the US has fallen to a new low. What it is telling us is that people are uncomfortable with their level of savings and that at the first sign of undue economic weakness they will take precautionary measures to protect themselves. This is exactly what causes a balance sheet recession, folks.
The second chart is telling us that housing is still suffering. I read the chart as saying that people are not only being forced out of their homes into rentals, but that it could signify a shift in thinking about the necessity, the value of home ownership. This is a statistic to watch. Notice that the percentage of people saying now is a good time to buy is not increasing despite record low rates.
