Jobless claims have been lingering around the 400,000 mark now since the end of December. Weekly claims of 391,000 for the week ended February 19 was better than anticipated and another positive step in the gradual downward trend.
The sharp decline in the 4-week moving average is also an encouraging development as it closes in on the sub-400k level not seen since July 2008.
Employment, one component of the Fed’s dual mandate, continues to be the Achilles heel for the economy. With many signs that the economy has gathered momentum in recent months and further growth anticipated, it seems just a matter of time before employers will be forced to ramp up hiring to meet increasing demand. At this point, however, meaningful job creation remains frustratingly elusive.
Given the lackluster jobs picture and limited concerns about near-term inflation, the Fed remains in a good position to maintain its stimulative stance.
Consumers perked up a bit in January after a declining unemployment rate and positive equity gains contributed to the highest consumer confidence in three years.
While confidence may not translate directly to consumption, a prolonged period of improvement in sentiment should ultimately translate to greater spending, ultimately reinforcing a virtuous cycle reinforcing job creation.
When we look to current risks to the economy, the unrest in the Middle East and rising oil prices are high on the list, although oil prices would still need to move much higher from current levels to be a serious threat. With companies still resisting any expansive hiring, the long road back to full employment is another underlying risk to sustained growth.