The Fed Is Taper-Ready, But Where Are Jobless Numbers Headed?

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Initial claims for unemployment benefits declined for the first time in three weeks, a sign that the growth reflected in October’s and November’s jobs report was not transitory. In recent weeks, initial claims for unemployment benefits have ticked upward. After months as one of the only sources of strength in labor market, that uptick appeared to be a cause for concern. Excluding the effects that Washington’s political drama had on jobless claims in the month of October, the number of Americans applying for unemployment benefits has been trending down for much of the year. Furthermore, even though initial claims data — which serves as a proxy for layoffs — do not tell the whole labor story, that strength was encouraging.

Yet, after jumping 69,000 to 369,000 claims in the week of December 7 and rising 11,000 to 380,000 claims in the week of December 14, initial applications began charting a new course. Of course, for the most part, those increases can be attributed to seasonal volatility. The Department of Labor has stressed that during the holidays, the underlying trend is what is most important. While the department announced Thursday morning that claims plunged by a greater-than-expected 42,000 to 338,000 in the December 21 week, the underlying trend has become more concerning. Jobless claims provide the first look at the employment situation for any given month, but since the weekly figures can be volatile, economists use the four-week moving average to understand wider trends.

Last week, that average came in at 343,750, a figure little changed from the month-ago trend. However, the Labor Department reported Thursday that the four-week average rose by another 4,500 claims to 348,000, which is approximately 15,000 claims higher than the month-ago trend. That movement, while not reliable, is a negative indication for the jobs market. A Labor Department official did note that the holidays make it difficult to adjust for fluctuations in initial claims.

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