The employment picture is improving slightly, but economists caution it is a very tentative trend that could abruptly end.
"We've stabilized in labor markets. There's no question we've stabilized. That's the good news. We've seen the private sector step up to the plate, and I think November will be a better month," said Mesirow Financial chief economist Diane Swonk.
The economy added 80,000 jobs in the month of October, and unemployment was 9 percent.
Economists are encouraged by signs that companies are not cutting workers, and they say November's jobs report could be better than the tepid growth of October.
The weekly jobless claims reports for the past three weeks have shown improvement, slipping by 5,000 to 388,000 Thursday. The four-week average is now 397,000, under 400,000 for the first time since April.
Job growth has been one of the most elusive and frustrating aspects of the recovery, which has just shown signs of picking up.
"So far employers have weathered the storm. They are not laying off en masse," said Credit Suisse economist Jonathan Basile.
"It's a vote of confidence that we're not in full blown cost-cutting mode," he said. "This is the one data point that's a high frequency leading indicator that's reliable."
But economists warn that the spillover from Europe's credit problems could hamper employers and start to reverse the improvements seen recently in a series of other economic readings, including this week's retail sales. A number of Wall Street economists raised their fourth quarter GDP forecasts to 3 percent or better this week but they warn the path in the first quarter is not that clear.
"We've had significant worsening in interbank rates. In general, tighter financial conditions," said Citigroup economist Steven Wieting. "...it threatens growth."
Wieting said these types of financial conditions, which show up in widening swaps spreads and other measures, do not usually precede increased hiring.
"We're seeing signs of credit tightening by European banks is happening inside the U.S. We're seeing forward looking weakness in exports after two years of gains," he said. He has not raised his 2 percent forecast for fourth quarter GDPgrowth, and expects the first quarter of next year to be more sluggish.
But Wieting also said the economy is currently showing a surprising resilience. "It's impressive that we're seeing more than just payback for the weak first half of the year," he said.
He said the improving trend in claims typically precedes stronger hiring, and November could look better than October. "Most of the things we're worried about are not about how the fourth quarter looks. It's all about financial stability and policy mistakes," he said, adding most of those are issues from Europe.
Swonk said the work of the Congressional "super committee" could also be a factor for the economy. As of Friday, the committee appeared stalled in its task of finding $1.5 trillion in deficit reductions in time for a vote next Wednesday. If the committee fails to agree on proposed reductions, there would be automatic cuts that kick in in 2013.
"I do worry about the timing because the super committee could miss their mark here. Retailers are absolutely crazed this is happening before Black Friday. There is a trigger here, because we could get an S&P downgrade," Swonk said.
Standard and Poor's downgraded the U.S. credit rating after the acrimonious debt ceiling debate during the summer which led to the creation of the super committee.
She said the debt ceiling debate and downgrade did damage the economy in August.
This week's claims report was also the survey week for the employment report. "Most of the drama is going to take place after the survey," she said.
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