Jobless claims remain elevated, but virtually unchanged from prior week
Jobless claims continue to hover around their 4-week average of 424,000, ending the week of June 4 at 427,000, up slightly from the prior week. While roughly in line with economist expectations, the result provided further evidence of a softening in labor market conditions in recent months. Claims have been trending upwards over the last two month, after the February trough of 375,000.
The employment market showed continuing signs of deceleration with the May Employment Situation report released last week. While the uptick in the unemployment rate to 9.1% can be partially attributable to discouraged workers reentering the workforce, the pace of job creation has also slipped considerably.
Consumer sentiment is likely to decline further if the emerging weakness in the jobs market continues for an extended period. With confidence already at a low level for an economy that exited recession two years ago, some trimming of consumer spending is to be expected in that scenario.
Leading economic indicators are signaling that the economy is at risk of slowing further from an already lackluster rate of growth in the first half of the year. Incoming data over the next several months may prove critical to determine whether or not the economy will find its footing and reaccelerate or whether the expansion will stall out.
While the Federal Reserve remains split on the need for further quantitative easing, the potential for the central bank to take further actions to support economic growth and job creation, particularly with inflationary pressures easing, is increasing.
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