Economists Divided on Whether Jobless Claims Signal Recessionary Data
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Initial claims for unemployment benefits in the United States came in higher than expected with 381k claims in the week ending June 13, following a 2k upward revision to 386k in the previous week. Economists were divided as to what these figures mean for the broader economy.
Robert Stein, senior economist at First Trust Advisors, said even with two weeks of claims above 380k, the figures do not indicate recession levels. "Both initial claims and continuing seem to remain at levels that signify no recession, but rather sluggish growth," he said.
The four-week moving average for initial claims is now 375k.
Stein said the numbers bounce around quite a bit week-to-week and month-to-month, and only a four-week average "persistently above 400k" would be worrying, adding that a figure above 425k would signal a recession.
Not all economists were as optimistic, however.
"This is recession territory, at least if the experience of 2001 is a guide," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
"The rebound in claims over the past two weeks, after the Memorial Day seasonal drop, has pushed the eight-week average to a new cycle high of 374K," he added.
Since hitting a two-and-a-half year high of 407k in the final week of March, the number of initial claims has been relatively steady around the 370k mark, but continuing claims have been on the climb, indicating that those who have lost their jobs are finding it difficult to re-enter the labour force.
"[T]he key point here is that the pace of layoffs is now quite high, with no prospect of any reversal or even a levelling-off in the near future," Shepherdson said. "Rising layoffs and slowing hiring can only mean further declines in payrolls and a rising unemployment rate."
Continuing claims fell to 3.060 million for the week ending June 7, marking the seventh consecutive week above the 3 million mark. The four-week moving average is now 3.097 million, down from the moving average of 3.099 million in the previous week.
Millan Mulraine, economics strategist at TD Securities, said continuing claims "edged down sharply" and were "much lower than the 3135K print expected by the markets."
Overall, he said the report was "slightly better than markets expected, as it indicated a modest improvement in the U.S. labour market in June, highlighted by the decline in the level and 4-week trend of continuing claims."
Note: This week's claims report is the same week used for the nonfarm payrolls survey from the Bureau of Labor Statistics, to be released July 3.
By Patrick McGee and edited by Cristina Markham
©CEP News Ltd. 2008
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