Initial jobless claims declined slightly last week to 382,000 from an upwardly revised 385,000 in the preceding week. The four-week average increased modestly to 377,750, continuing the steady upward trend that has been in place since early August.
Weekly claims have been gradually trending higher since mid-year. The good news is that readings at this level still suggest an expanding economy and net job creation. Nonetheless, there has been a gradual uptick in claims that has accompanied evidence of a slowing economy, and that fails to inspire confidence in the near-term outlook for the labor market.
While the weekly numbers were somewhat weaker than anticipated, the difference isn’t enough to meaningfully alter expectations. Businesses clearly remain reluctant to aggressively boost their workforces amid the current risks associated with the soft economy and significant uncertainty surrounding fiscal policy next year.
The Fed’s announcement of additional monetary stimulus last week was squarely aimed at fueling economic growth and boosting asset prices. Ideally, simulative measures would also extend to labor market conditions, but there is great skepticism over whether or not these additional efforts will be effective in spurring job creation. Quantitative easing has been a positive for stock prices, as much of the rally in the past few months was undoubtedly driven by anticipation of further Fed action as economic data faltered. Whether or not it has any meaningful effect on the underlying economy remains to be seen, but it’s not a slam dunk.
The bottom line is that credit is still generally cheap, but credit demand is still restrained. Households remain focused on saving more and spending less as they rebuild personal balance sheets in the aftermath of the Great Recession. Businesses remain wary about the lackluster recovery and the future impact of fiscal policy and continue to find ways to get by without aggressively hiring.
Ultimately, anemic economic growth, fiscal and political uncertainty, and the ongoing debt crisis in the Eurozone remain sources of anxiety for both consumers and investors. Today’s unsurprising evidence that the jobs market remains lackluster will have no effect on that skeptical mood.
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