Jobless Claims (week of 10.1.11) Research Notes

by Jim Baird on October 6, 2011

Jobless claims rise less than expected; employment situation still challenged

Initial jobless claims edged back above 400,000 for the week ended October 1 to 401,000, while the four-week average dipped to 414,000.

Last week’s surprisingly good result, already suspect as the Department of Labor acknowledged difficulties in applying the seasonal adjustment due to a timing anomaly, was revised slightly higher to 395,000. 

Jobless claims had been trending lower throughout much of 2010 as the economy recovered, but there’s been no meaningful improvement throughout the course of 2011.  At its current level, the four-week average is just slightly better than it was at the outset of the year.

Claims had broken below 400,000 for an extended period earlier in the year, but that trend wasn’t sustained.  Recent results have indicated some weakening since reaching a recent low of just over 400,000 in August.

While moderately better than anticipated, today’s report is still soft and not inconsistent with other indications of a deceleration in the pace of economic growth in recent months.

Although the ADP Employment report surprised to the upside yesterday, its predictive value for the monthly employment report has proven to be limited.  After last month’s employment report signaled no job creation in August, tomorrow’s nonfarm payrolls number is highly anticipated by market participants looking for clues to the near-term direction of the economy. 

Based on recent data, the economy still appears to be clawing its way forward, but positive momentum is quickly waning.  As we look forward from here, slow growth, no growth, or even contraction are all still viable outcomes.  As always, volatility thrives on uncertainty – and there is no shortage of that.  As such, we remain cautious in our near-term outlook for the economy and risk asset returns.

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