Initial jobless claims again unexpectedly rise

There is a second consecutive hiccup on the labor front. At least, investors hope it's only a hiccup: for the second straight week, initial jobless claims rose. According to the U.S. Labor Department, this time, they rose from 561,000 to 576,000, an increase of 15,000. Also, continuing claims rose for the second week in a row, increasing by 2,000 to 6.241 million.

Economists surveyed by Bloomberg News had expected jobless claims to fall to 550,000. On the other hand, 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; by this measure, the average for initial jobless claims increased by 4,250 to a total of 565,750.
Economists also monitor the continuing claims stat because it provides a snapshot of how long it's going to take the typical person to find comparable employment once he/she has sustained a job loss. In general, continuing claims above 3 million reflect a slack labor market, indicating extended 6-9 month (or longer) job searches.

Some economists will likely cast aside the second consecutive weekly rise in initial claims as an anomaly, and focus on the downtrend in the more-telling 4-week moving average. However, many market participants may begin to express some concern. If the rise in initial jobless claims persists, it could begin to raise concerns about a retrenchment in the labor market - something that would be bad news for U.S. stock markets and investors.

Economic Analysis: Again, given that the second consecutive weekly rise occurred in a summer month (August), historically a volatile period for jobless claims, we'll ignore the data point. The rise suggests that companies are still attempting to cut costs even as the economy stabilizes; one way to do so is a job pare-back.

On the other hand, if the increase continues past Labor Day, that would be cause for concern. That's because the nation has an enormous employment task ahead of it: more than 6.7 million jobs have been eliminated since the recession's start in December 2007 and there are now 14.7 million unemployed adults. Hence, there's little room for a retrenchment in the job lay-off category. Any reversal of the downtrend would throw a host of social spending and related state/federal costs in the wrong direction. This is why the U.S. economy must continue to exhibit progress, long-term, from a workforce standpoint.
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