When looking at the data for weekly initial jobless claims, there are a few things to keep in mind. First, the series is only indirectly correlative to job creation, and individual data points mean very little. Second, the correlative level for any significant job growth in the past has been around the 325,000 mark, based on years of data in the previous decade. Third, the data in summer tends to be more volatile, thanks to temporary factory closures and retooling.
With all of that said, a jump in the number of claims is never a very good sign … unless you’re the Associated Press:
No, it's not RT @AP: BREAKING: US unemployment benefit applications rise to 360K, a level consistent with steady job gains
— Ed Morrissey (@EdMorrissey) July 11, 2013
A jump in claims — in this case, 16,000 — is a sign of steady job gains? Their news report was similarly mystifying:
U.S. unemployment benefit applications rose 16,000 last week to a seasonally adjusted 360,000, although the level remains consistent with steady hiring.
The Labor Department said Thursday that the less volatile four-week average increased 6,000 to 351,750.
The weekly applications data can be volatile in early July because some automakers briefly shut down their factories to prepare for new models and many schools close. Those factors can create a temporary spike in layoffs.
The broader trend has been favorable. Applications have declined steadily in the past year, as companies have laid off fewer workers and stepped up hiring. In the past six months, employers have added an average of 202,000 jobs a month. That’s up from an average of 180,000 in the previous six months.
We’ll get back to monthly job-creation averages in a moment. Market Watch had a more sober take on the report, emphases mine:
The number of people who applied for unemployment benefits in the first week of July jumped by 16,000 to a seasonally adjusted 360,000, marking the highest level in two months, the Labor Department said Thursday. Economists polled by MarketWatch had expected claims – a proxy for layoffs – to rise to 349,000 in the week ended July 6 from a slightly revised 344,000 in the prior week. The claims report often seesaws in July because of shutdowns at auto plants for retooling and temporary layoffs related to the end of the regular school year. The July 4 holiday can also skew the data. The less volatile four-week average of claims rose a smaller 6,000 to 351,750 and reflected little change in the U.S. labor market.
Holidays can play hob with data collection in this series, but in this case, none of the states supplied estimates; all reported on actual claim numbers. This increase isn’t a big jump in any case, and still puts the series in roughly the same 340K-360K range in which it’s been holding for the last several months. The four-week average, which is a more reliable measure for correlative analysis, falls right into the middle of that range, although the move upward of 6K demonstrates the exact opposite of the AP’s analysis.
As far as the monthly averages go, they do show a small amount of gains being made, but it’s nearly insignificant in the scale of job creation needed to put a dent into the millions of sidelined workers. The US economy needs to add 150,000 jobs a month just to keep up with population growth. In order to catch up to the job losses over the last six years, we’d need to add between 6-8 million more jobs. At the rate of growth highlighted by the AP as “steady job gains,” we’d need 10 years to reach the bottom end of that range.
In other words, this isn’t a signal of steady job gains. It’s another signal of ongoing stagnation. That’s why Ben Bernanke continued to push Fed stimulus last night.