Jobless number hits record 6.35 million, but a big drop in initial claims
A mixed bag regarding the most recent job market data from the U.S. Labor Department, but all factors being equal, economists and business executives will take it.
Continuing claims rose 56,000 to a record 6.35 million, but initial jobless claims fell 34,000 to 601,000 for the week ended May 2 -- a trend that, if it persists, suggests layoffs may have peaked. The 601,000 figure also marked the lowest initial jobless claims level in three months.
Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 635,000. The four-week moving average decreased 14,750 to 638,250.
See layoffs declining
John Herrmann, chief economist at Hermann Forecasting in New Jersey, predicts a brighter second half for the U.S. economy in 2009.
"The pace of job cuts will slow over the next few months," Herrmann told Bloomberg News Thursday. "The economy is moving toward stabilization and recovery in the second half. Consumers' prospects for keeping their job are improving."
Fewer layoffs mean that consumer spending declines will likely abate. However, investors should keep in mind that unemployment is a lagging indicator. It will likely continue to rise for several months even after the U.S. economy starts to recover, as companies first use existing capacity to ramp-up production, then later add employees as demand strengthens.
Economic Analysis: Again, one up, one down regarding jobless claims, but the trend could be the economy's -- and the investor's -- friend. If initial 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. It would not signal net job growth, but would point to a day when demand starts to rise.