Jobless Claims Raise Concerns About Job-Market Recovery
The uptick in weekly jobless claims during April is raising concerns the job market’s progress may be slowing down.
Jobless claims were reported at 388,000 Thursday and with revisions, the four-week moving average rose by 6,250 to 381,750, its highest level since the week ending Jan. 7.
“It’s a setback. It doesn’t mean the expansion is over. It doesn’t mean that firms are getting into a cost-cutting mode. It just means there’s been a little uptick with the rate of layoffs. It’s still consistent with job growth,” said Jonathan Basile, economist at Credit Suisse.
Jobless claims have been elevated in the 380,000 area for three weeks now but economists say it’s too soon to say whether it’s anything more than a seasonal setback, where employers are making up for extra hiring done earlier in the year because of the warm winter weather.
“It’s a little concerning certainly,” said Michael Feroli, J.P. Morgan economist. “I think with each passing week that you’re in the 380,000 area makes it a little harder to dismiss.”
The March employment reportshowed that nonfarm payroll employment rose by just 120,000, well below expectations and half the level of jobs created in February. January nonfarm payroll growth was 275,000 after a revision. Now, it’s likely the consensus estimate for April, which calls for 175,000 jobs added, is going to come down.
“We’re probably in the ballpark of 150,000,” Feroli said of the April jobs report, which is due out next week. He expects the unemployment rate to be unchanged at 8.2 percent.
“I think it’s still too soon to totally dismiss this,” Feroli said of the claims data. “It could be a seasonal issue. Holiday impact is still playing a part. So, I think it’s kind of hard to say what the new trend is."
Citigroup economist Steve Wieting said he expects to see 145,000 nonfarm payrolls were added in April.
“The claims data have erased the first-quarter decline, and we think that, as well as what we see within the details of the employment report and the coming seasonal-adjustment hurdles, is pointing to a second quarter where employment growth is much closer to the March report than the three months leading up to it,” said Wieting.
Wieting said there are technical factors at play. For instance, recent Labor Department data showed that hiring and firing on a gross basis is at a lower level. “It goes beyond the weather. Part of what we’re seeing is the labor market is just less dynamic. There’s a lower level of turnover — both hiring and firing combined. You’re getting about 80 percent of the turnover,” he said.
“We’re expecting strong seasonalities from a labor market that’s just not moving much seasonally. It’s not a sign that employment is worsening at all,” he said.
As a result, he said, the strength of the labor market was overstated in January and February. “What we have to correct is the bullishness we had on the stronger payroll data,” he said, adding that he expects the slower pace of job growth will continue through the second quarter.
Basile said the claims data make it unlikely the April trends matched the 200,000-plus job growth of earlier in the year.
“We have a huge hole to fill in the labor market. To fill it quickly would feel better if we had payroll prints that were over 200,000. You’re sort of sliding back and if claims are suggesting that, it doesn’t feel as good. It raises a concern about a slowdown — not a lot — but it raises it because this is the one indicator that is almost in real time,” said Basile.
“It tracks the business cycle. It gives you the pulse of what's going on in the economy pretty much every week. Of course you’ve got to smooth it out,” he said. For that reason, economists give more credence to the four-week moving average, which is also elevated.
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