Initial jobless claims declined in the week of May 19 to 370,000 from an upwardly revised 372,000 in the week prior. The four-week average improved to 370,000 as weaker data from late April dropped out of the calculation.
While the data suggested a very modest improvement, the result was slightly worse than anticipated by the markets and was unchanged from the prior week results as originally reported. Realistically, the claims number has been virtually unchanged in the past four weeks, suggesting at least some temporary stabilization in the trend.
Jobless claims remain in a lackluster range: too high to characterize the jobs market as strong, but still well below the critical 400,000 level that sounds the alarm bell. More broadly, the jobs market remains in a sluggish stretch, as job creation has slowed in recent months. The measured decline in the unemployment rate has been driven more by individuals leaving the workforce than robust job creation.
The recent weakening in the pace of improvement in the jobs market also appears to be weighing on consumer confidence. Whether or not that translates to consumers gripping their wallets a little tighter in the months ahead will be critical to the near-term direction of the U.S. economy.
Looking beyond the apparent slowdown in the domestic economy, the resurgent crisis in Europe and widespread weakness in the global economy present risks to the U.S. economy as well. While the economy still appears to be modestly growing, there is a window of risk that exists, with the potential for a shock to throw cold water on all-important consumer spending. Thus far, consumers have chosen the path of reduced savings to further their recent spending binge. In the absence of stronger income growth, increased consumer borrowing and decreased savings may be the primary factors keeping the economy from faltering further.
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