First time unemployment benefit claims rose by 35,000 from the previous week to a seasonally adjusted 445,000 — their highest level since October — but economists see little cause for concern. Most of the increase resulted from layoffs of the more than 500,000 temporary workers hired during the holiday months.
“This is the part of the year when the trends are particularly volatile week-to-week because of holidays and weather, so I don’t make much of this,” said Mark Zandi, chief economist at Moody’s Analytics. “The full month moving average is still 417,000. I think that’s the reality of where initial claims are currently. Several economists cautioned that the seasonal adjustment calculations could be flawed by less reliable weekly figures.
“These numbers tend to get reanalyzed and often adjusted weeks later when more data comes in, data gets cleaned, or they find a statistical error because something got double-counted or not counted at all,” said Northeastern University economist Barry Bluestone. With retail sales expected to rebound this holiday season, firms hired more temporary workers for eight to 10 weeks, and that inevitably led to a larger string of layoffs after Christmas, he added.
But in terms of the larger picture, Bluestone said 35,000 additional claims in a workforce of 135 million isn’t the death knell of the labor market. In fact, a number of economic indicators suggest we will see a faster pace of economic recovery this spring as it becomes increasingly difficult for firms to squeeze more output from their workforce, Bluestone said.
“Confidence is rebuilding in the economy, so it makes sense that over the next few months firms will begin to rehire, thinking this is a good time to increase their output without too much fear of an immediate layoff,” he added.
Last month, the unemployment rate dropped from 9.8 percent to a 19-month low of 9.4 percent. But the drop was, in part, a product of 260,000 people who stopped looking for work, which brought down the labor force participation rate to 64.3 percent, its lowest point yet. But Zandi projects the job market will trend toward a recovery, with perhaps a “spring awakening” on the horizon. “We need to see claims fall consistently below 400,000 per week to get enough job growth to bring down unemployment in a substantive way, and we’re not quite there yet, but I suspect we will be by the spring.” He says firms’ apprehension to hire will dissipate by then as policy arguments over the Bush-era tax cuts and other contentious legislation quiet down somewhat. “We’ve already got strong corporate profits, businesses have very solid balance sheets, credit is starting to flow more freely. The one missing ingredient is confidence.”
The current level of claims is consistent with the addition of about 150,000 jobs per month — what Zandi says is appropriate to maintain stable unemployment. “We’re holding our own for the time being,” he said.
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