Mixed employment data: jobless claims rise, but continuing claims fall

Another mixed bag regarding the most recent labor market data. While initial jobless claims rose by 3,000 to 608,000, continuing claims fell 148,000 to 6.69 million, the U.S. Labor Department announced Thursday. Meanwhile, the 4-week moving average decreased 7,000 to 622,250.

Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 610,000.

Further, it was the lowest continuing claims total since May 9. Falling continuing claims, which hit a record 6.82 million last week, could represent another 'green shoot,' if the metric moves steadily lower -- it would reflect a peak in long-term joblessness, which historically has been a sign that economic growth is ahead.
Is the worst over when it comes to lay-offs?

John Herrmann, chief economist with Herrmann Forecasting in New Jersey, is in the camp that argues the worst is over regarding job lay-offs.

"Companies will start pulling back on the pace of job cuts in coming months," Herrmann told Bloomberg News Thursday. "We've seen jobless claims peak."

Also, investors should not be alarmed by the weekly jobless claims rise. Economists view the 4-week average as a better indicator of unemployment conditions, as it smooths-out anomalies for strikes, holidays, or other idiosyncratic events.

Further, investors, as well as business executives, should keep the lower trend in continuing claims in perspective as it is not tantamount to job growth, and an enormous amount of work remains ahead for the U.S. economy and for policy makers. The U.S. economy has to add about 200,000 jobs per month – a roughly net 100,000 job gain over the monthly gain needed to keep unemployment from rising – for the next five years to replace the 5.7 million jobs lost during the recession.

Economic Analysis: Again, not much to write home about regarding jobless claims and continuing claims, but we'll take it. The key concerns are whether jobless and continuing claims can keep falling, and investors should keep in mind that lay-offs could start to rise again, on any number of factors, if the U.S. economic recovery does not gain traction. However, if jobless claims have peaked and repeatedly fall week after week, that would be the best news for the U.S economy since the recession started.
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