Initial jobless claims were 473,000 for the week of February 13, a result that was well above expectations and that marked a substantial reversal of the prior week’s decline.
The 4-week rolling average slipped to 467,500, and remains well off its 25-year high of 674,000, reached in March 2009.
We expect that moving forward, improved sales growth may result from a combination of businesses efforts to delay investments in new equipment and increased savings by consumers during the recession. Stronger sales will inevitably lead to more employment, though this reinforcing cycle may be slow to transpire given current sentiment levels for both consumers and businesses.
The minutes of the January FOMC meeting which were released yesterday illustrated again the Fed’s expectation that the nation’s unemployment rate will remain elevated for several years. Job growth is in large part a reflection of economic growth; without a robust increase in demand, the case for a rapid expansion in the labor force is hard to make.
We anticipate the employment situation will continue to show gradual improvement. However, the U.S. economy has lost over 8.4 million jobs since the start of the recession, and multiple periods of sustained employment growth will be necessary before we start to see levels reaching historical averages. With CEO confidence still well below pre-recession averages, it may be some time before employers believe that increases in demand are sustainable.
The bottom line here is that you have a jobs market that is in a deep hole, with small businesses – the key driver of job creation – extremely hesitant to make a move. Until small business owners gain better clarity on a variety of fronts – perhaps most notably regarding the strength and sustainability of the recovery, the availability of credit, tax policy, health care reform – we should expect job growth to be subdued.