Labor Market Steps Forward: Wages Grow and Jobless Claims Drop

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Initial applications for unemployment benefits are trending near pre-recession lows. In the week ended April 5, Department of Labor data show jobless claims fell close to a seven-year low of 300,000; the last time initial claims were that low was on May 12, 2007, before the Great Recession, when the figure measured 297,000. Even though jobless claims rebounded slightly this past week, they are still in line with pre-recession levels, when an average number of 320,000 initial claims were filed each week due to the normal churn in the job market.

In the week ended April 12, 304,000 Americans filed initial claims for unemployment benefits — an increase of 2,000 from the prior period’s upwardly revised 302,000 new claims. Even though claims increased, the rise was smaller than the jump to 315,00 new claims expected by analysts. Claims numbers still confirm that employers are holding onto workers as expectations for greater economic growth become stronger. Current jobless claims numbers are “collaborating with the other signals we have been seeing, which is the jobs market is slowly improving,” Moody’s Analytics senior economist Ryan Sweet told Reuters. “Some of the drop is normalizing from this winter’s depressive effect.”

More significantly, economists say any claims figure below 350,000 indicates moderate job creation. Initial claims for unemployment benefits — which serve as a proxy for layoffs — paint a picture of a strengthening and resilient labor market. If initial claims for unemployment benefits defined the whole labor market story, then the narrative of the jobs recovery would be easy to summarize: Progress is steady, or at least, the labor market situation is not worsening. Confirming the thesis of labor market resilience is the fact that the underlying trends in jobless claims remained positive.

But while the downtick in jobless claims can be called a positive sign for the labor market, it is important to remember that jobless claims numbers are a leading economic indicator, and therefore only offer indirect clues about the pace of hiring — the other piece of the labor market story. While “inroads” into unemployment are being made, progress is still slow. In other words, job growth may no longer be bad, but it is still sluggish.

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