Initial jobless claims edged higher last week, rising 13,000 from a revised 323,000 to 336,000. The four-week moving average dipped to 330,500, its lowest point since late 2007.
Early on, some were chalking up the most recent downtrend improvement in jobless claims to faulty seasonal adjustment factors. However, the sustainability of the overall downward trend suggests that the improvement may be more durable than initially believed.
Despite this recent uptick, the overall trend continues to provide evidence of slow, steady improvement in labor market conditions.
While the claims data indicates a relatively favorable environment for layoffs, job creation remains moderate as employers remain reluctant to hire in the face of only modest economic growth. With jobless claims at current levels, payroll gains would typically be more robust. Nonetheless, in the absence of faster growth, the need for employers to hire more workers – and their confidence in doing so – has been diminished. The result is a stubbornly high jobless rate and meager wage increases.
The Fed minutes released yesterday confirmed that a tapering of the ongoing open market purchases program is likely in the cards before year end, although not without some dissention about timing and communication within the Committee. In the meantime, capital markets may be subjected to additional volatility as investors attempt to calibrate their expectations for the future path of monetary policy.
All things considered, recent data appears to support the view that the economy continues to push forward at a sluggish, persistent pace, while economists once again point toward better growth in the quarters ahead. This has seemingly been the recurring theme for expectations over much of the past few years. As we move into the latter stages of the third quarter and move into the final months of the year, incoming data should provide a reasonable insight into whether those expectations will be met, or whether higher growth will fail to materialize.