Jobless Claims (week of 6.30.12) Research Notes

by Jim Baird on July 5, 2012

Initial jobless claims lower than expected to end the second quarter

Initial jobless claims declined to 374,000 for the final week of the quarter, better than anticipated and the best weekly result in nearly two months.  The four-week average also declined modestly to 385,750.

The recent retreat in new jobless claims in the past two weeks has temporarily alleviated concern that claims would push through the important 400,000 threshold. 

Today’s reports on the jobs market may provide a modest boost to the markets today, although tomorrow’s report from the Bureau of Labor Statistics looms larger.  The surprisingly good ADP Employment report in particular could be a pre-cursor to a better-than-anticipated June jobs report, but the predictive value of the ADP report has been spotty and often hasn’t been a good indicator of what the government’s report would show. 

Nonetheless, the jobs market remains mired in a lackluster stretch, with the risk still seemingly to the downside given stalling consumer spending and signs that the cyclically-sensitive manufacturing sector is weakening.

The Fed’s announcement that it would extend “operation twist” was a reminder to the markets that the nation’s central bank remains poised to act as needed to foster economic growth.  However, given its limited scale, it seems unlikely that the added stimulus will do much to impact the slowing trend in the economy.

The monthly Employment Situation report is always important, and the June report is certainly no exception.  Given the exceptionally disappointing May results, tomorrow’s report should provide additional clarity around whether the recently weak nonfarm payroll results were an anomaly or the early stages of a more sustained downward trend.

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