Jobless claims continue to fall

WALL STREET JOURNAL -- In a positive sign for the labor market, the number of U.S. workers filing new claims for jobless benefits decreased more than economists expected last week. Initial claims for jobless benefits fell by 33,000 to 521,000 in the week ended Oct. 3, the U.S. Labor Department said in its weekly report. The last time initial claims were this low was on January 3.

The four-week moving average of new claims, which aims to smooth volatility in the data, also fell by 9,000 to 539,750 from the previous week's revised figure of 548,750. The last time the four-week moving average was this low was on January 17.

Economists at JP Morgan Chase & Co. wrote in an economic analysis last week that claims generally appear to be on a downward trend, but the pace at which they are falling is a bit sluggish. "The drop has been somewhat slow relative to other large recessions," the economists wrote last week. "Initial jobless claims have fallen 18% in the 26 weeks since they peaked. In the same time span, jobless claims fell by 23% after the 1975 recession, 33% after the 1980 recession, and 29% after the 1982 recession. Claims are usually a good predictor of employment, and the slowness of their decline could indicate a sluggish recovery in the labor market."

Mark Perry provides commentary regarding his chart below: From the early April peak of 658,750, jobless claims (four-week average) have fallen by 119,000 (-18%), and that measure of jobless claims has fallen in 20 out of the last 26 weeks. It's also interesting that in the WSJ article above, the Chase economists didn't mention the two most recent recessions of 1990-1991 and 2001. During those two recessions, jobless claims fell by a comparable amount, by -15% from the March 1991 peak and by -19% from the October 2001 peak.It’s the pace and strength of the recovery that matter now, particularly whether improvements in gross domestic product translate into increased employment. Until businesses start adding to their payrolls -- probably not until next year -- indicators tracking the consumer (retail sales) and manufacturers (durable goods orders) will likely remain unsteady. Housing sales (another consumer indicator) have been doing well this year, having gotten a boost from Uncle Sam in the form of the $8,000 federal income tax credit for new home buyers.