Jobless Claims (week of 8.27.11) Research Notes

by Jim Baird on September 1, 2011

Unemployment claims fall as jobs market treads water for now

The number of new jobless claims was lower than in the previous week, but remained above the 400,000 threshold that’s often associated with a steady employment situation.  Initial jobless claims for the week ending August 27, fell by 12,000 to 409,000.

The elevated level of claims, while recently pushed higher by the Verizon labor dispute, remains consistent with other indicators of softening in the economy.  Although the Chicago Purchasing Manager Index yesterday was less negative than feared, other recent data suggests a broad weakening in the manufacturing sector across much of the country.

Market observers are feeling a fair amount of anxiety around tomorrow’s employment report, with hopes for a moderate increase in nonfarm payrolls in August tempered by fear that a flat result or outright decline is possible.

Even if the actual result comes in better than anticipated, the slow pace of growth remains insufficient to contribute to a virtual cycle of healthy job creation.  The best potential outcome, it seems, is for the economy and the jobs market to continue to tread water.

The economy remains on a slippery slope, but there is little data thus far to support the notion that the economy is actually already contracting.  The risk certainly still exists on the horizon, however, as there is very little cushion remaining to absorb a further slowdown in growth without actually slipping into recession.  A shock to the system at this point would likely be the final straw; if that can be avoided, the economy may still be able to re-gather some momentum and move forward.

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