Rising Jobless Claims Point to a Still-Weak Labor Market

Initial jobless claims continue to trend in the wrong direction: They rose 13,000 to 472,000 last week, the Labor Department said, and are now up 3.5% since January. A Bloomberg survey had expected them to fall to 450,000. And the more-telling four-week moving average -- which smooths out anomalies in any one week -- also rose, by 3,250 to 466,500.

Jobless claims need 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 prompts most companies to curtail layoffs and resume hiring.

The long-term unemployment situation also worsened: Continuing claims rose 43,000 to 4.62 million.

Separately, there was one bright spot on the labor front: online job ads. The Monster Employment Index rose for the sixth straight month, increasing 7 points to 141 in June, Monster (MWW) announced Thursday. The index, a monthly measure of U.S. online job demand, was at 117 a year ago.

Lofty Continuing Claims Are Worrisome

The Labor Department's jobless claims report shows the highest insured unemployment rates were in Puerto Rico, 6.6%; Alaska, 5.1%: Oregon, 4.9%; California, 4.4%; Nevada, 4.4%; and Pennsylvania, 4.4%.

True, the 22% drop in initial jobless claims from their 604,000 total a year ago can be viewed as a sign of an expansion capable of reducing layoffs. But the bears point to the still-high 4.62 million continuing claims as evidence that the recovery isn't creating enough jobs to substantially reduce the U.S. unemployment rate, currently 9.7%.

One point the bulls and bears agree on is that should the rise in initial jobless claims persist, it would suggest one of two things. That companies are pausing before hiring -- as they gauge the durability and strength of the recovery and their likely, future need for more employees. Or that the recovery is weakening.