New Jobless Claims Drop, but Job Growth Is Still Weak

The U.S. economy made some modest progress on the employment front in the week ending June 19. Initial jobless claims dropped more than expected, by 19,000 to 457,000 -- the lowest level for claims in six weeks, the Labor Department announced Thursday.

A Bloomberg survey had expected jobless claims to rise to 472,000. On the sobering side, the more-telling four-week moving average -- which smooths-out anomalies for holidays, strikes and other one-time events -- declined just 1,500 to 462,750.

The four-week average's consistently elevated level is a cause for concern because that figure needs to drop below 400,000 during the next two quarters to give economists and investors confidence that commercial activity is increasing at a pace that will prompt most companies to curtail layoffs and resume hiring.

Back on the positive side: The long-term unemployment situation also improved slightly. Continuing claims fell 45,000 to 4.548 million.

Half-Full or Half-Empty?

The states with largest increases in claims were California (17,572), Pennsylvania (5,266), Florida (4,958), Texas (2,971) and Illinois (+2,481). The largest decreases were in New Mexico (708), Kansas (596), Mississippi (522), Louisiana (286) and Alabama (251).

Economic bulls who see the U.S. economy improving in the quarters ahead point to the 25% drop in initial jobless claims from their 613,000 total a year ago as a sign of an expansion capable of reducing layoffs.

However, the bears point to the still-high 4.548 million continuing claims as evidence that the expansion isn't creating enough jobs to substantially reduce the U.S. unemployment rate, currently 9.7%

One thing the bulls and bears can agree on is payroll costs. With hiring this modest, company costs for wages and salaries will remain contained. There's little upward wage pressure in the economy -- an operational plus, particularly for labor-intensive businesses.