Initial jobless claims edged up in the week ending August 3, rising from a revised 328,000 to 333,000. Last week’s claims print was the lowest weekly result since January 2008. The four-week moving average also dropped to 335,500, its lowest point since November 2007.
Despite the week-to-week volatility in the claims figures, the long-term trend continues to suggest a slow, steady improvement in labor market conditions.
In past expansions, initial claims at current levels would be accompanied by a more rapid hiring clip and more robust job creation. Layoffs are down from a year ago, suggestive of a healthier labor market and undoubtedly contributing to improvement in consumer sentiment. Nonetheless, there is still some hesitation on the part of employers to take their hiring practices to the next level. With growth still muddling along at a sub-2.0% clip, the incentive to create jobs is also limited.
The potential for the Fed to begin to pare back its bond purchases in the months ahead continues to garner headlines and influence financial asset prices. The Fed’s July statement suggests the FOMC is content with maintaining the $85 billion in open market purchases to promote growth and ward off further disinflationary pressures. However, statements from some FOMC members suggest that tapering may still be forthcoming as soon as September. The timing and extent of any decision by the Fed to alter the current course of monetary policy remains a major source of uncertainty and perhaps the greatest potential near-term catalyst for further market volatility.
Overall, recent economic data has been somewhat mixed, but the trend is generally a positive one in several areas of the economy. Consumers have proven their resilience throughout the first half of the year, housing remains solidly in recovery, and the manufacturing sector appears to be emerging from its funk. The next several months may provide the key to whether or not growth accelerates heading into year-end, as widely anticipated, or whether that surge will fail to materialize.
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