Initial jobless claims rise, but continuing claims fall

A minor setback on the job front: initial jobless claims rose 30,000 to 554,000 for the week ending July 18, the U.S. Labor Department announced Thursday. Economists surveyed by Bloomberg News had expected this week's claims to total 560,000.

Meanwhile, the four-week moving average for initial jobless claims actually decreased 19,000 to 566,000. Economists view the four-week average as a better indicator of unemployment conditions, as it smooths-out anomalies for strikes, holidays, or other idiosyncratic events.
Zach Pandl, an economist with Nomura Securities International in New York, said the job lay-off and jobless claim trend is down, but investors should not conflate that with a healthy employment market.

"The level of initial claims is still consistent with deep job losses but smaller than we saw in the first months of this year," Pandl told Bloomberg News Thursday.

Meanwhile, continuing claims fell 88,000 to 6.225 million. Continuing claims had hit a record 6.915 million earlier this year.

Economic Analysis

A slightly unfavorable jobless claims report: any initial jobless claims rise is lamentable, but as noted, the four-week moving average is more indicative or the prevailing -- currently falling -- trend. Of course, if the jobless claims rise persists and the trend reversed, that would be a danger sign for the economy as it could signal a 'double-dip' recession.

Conversely, if jobless claims have peaked and repeatedly fall month after month, that would be the best news for the U.S economy since the recession started in December 2007. It would not signal net job growth, but jobless claims declines point to a day when demand starts to rise -- something that would be good news for corporate revenue and earnings, and by extension, for the U.S. stock market.
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