Initial jobless claims rose to 336,000 for the week ending March 16, a modest increase over the prior week but still a better result than expected by economists.
Reports in recent weeks have suggested a moderate strengthening in underlying job market conditions. That improvement is also apparent in the 4-week moving average, which declined by 7,500 to 339,750.
Claims had been relatively range bound between the 350,000 – 400,000 marks, but have broken that lower bound in recent weeks. If these recent results prove to be sustainable, continued growth in nonfarm payrolls and further downward pressure on the unemployment rate should follow.
While today’s report is a modest positive, labor force mobility and wage growth are still relatively limited.
Continued improvement on the jobs front is positive for the economy, but a more resilient pace of income growth is still lacking. Although consumer confidence suffered a setback in March, it has been on a gradual upswing. From a long-term perspective, it remains relatively restrained – far below what would be ideal. Recent hits to household budgets as a result of the increase in payroll taxes and surging energy costs are certainly being felt, exacerbating the effect of modest wage growth.
Thus far, consumers have reacted by trimming savings rather than spending less, but it’s unclear how long that can continue. If confidence extends its recent slide, consumers are likely to tighten their budgetary belts a bit as well. Conversely, it would be a very positive sign in the near-term if consumers are able to weather the storm effectively until the economy reaccelerates as anticipated later this year.
Economic data over the past few months has been mixed, but generally better than expected. The economy appears to remain on a slow grind forward, but remains susceptible to setback against the backdrop of the global slowdown.
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