Consensus forecasts had expected a modest fall in initial unemployment claims this week; instead they increased by 15,000. Similarly, continuing claims rose by 29,000.
Bloomberg still tried to put a happy face on this not-aligned-green-shoots story. This was the third and longest paragraph of a mere four paragraph report:
Recent economic data shows some areas of the economy, such as housing and manufacturing, are seeing a smaller pace of decline, and the Federal Reserve said yesterday after a two-day meeting in Washington that the economy’s slump is “slowing.” Even so, companies have been loath to hire new employees, in part because they are waiting for sustained gains in demand.
Reuters, by contrast, opted for just the facts:
The number of U.S. workers filing new claims for jobless benefits unexpectedly rose last week and the number staying on the rolls after collecting an initial week of aid also edged higher, government data on Thursday showed.
Initial claims for state unemployment insurance increased by 15,000 to a greater-than-expected seasonally adjusted 627,000 from a revised 612,000 the week before, the Labor Department said. Analysts polled by Reuters had forecast claims to drop to 600,000 from a previously reported 608,000.
The heightened focus on jobless claims results from the fact that a turn to reductions has been found in past recessions to be a coincident indictor of recovery. However, that experience has been for normal inventory driven downturns, not financial crises. Both the US Great Depression and Japan’s post bubble era featured a phase after the initial financial implosion where the real economy appeared to be stabilizing and most observers believed a sustained recovery was in the offing. Instead, both countries moved into a second leg of the downturn. The countries that did come comparatively quickly out of a financial crisis dealt aggressively with their banks and were also able to depreciate their currencies and use an export boom to restart their economic engines. The US is not using either of these remedies. Yes, the dollar has weakened, but not to the degree that it did in the other cases, such as the Nordic countries in their banking crises, and China has made clear it won’t tolerate much of a fall. In other words, an attempt to use trade in a major way to get us out of our mess would likely trigger competitive devaluations and/or protectionism, a negative sum game.
That’s a long-winded way of saying one should exercise ample caution in reading the tea leaves for this contraction using patterns for traditional inventory-driven downturns.