We haven’t written much about weekly initial unemployment claims recently, but we should probably take a quick look ahead of Friday’s big payroll announcement.
The first thing to remember is that the weekly reading itself tends to jump around a lot and subject to later revisions. Claims increased to 457,000 last week, higher than estimates and a reversal of the prior week’s surprisingly low number of 437,000.
But it’s the 4-week average that is more meaningful, and that number has been roughly flat since the start of the year — a trend we’ll demonstrate by stealing (with thanks) a chart from Calculated Risk:
As if you needed to reminded, this is consistent with a weak labour market, as the average is above what economists would expect to see in an economy with healthy job creation.
For a longer-term view, this chart from the St Louis Fed shows that this recent sideways trend is happening at a level that is well above the norm for an economy in non-recessionary times:
Separate but related, productivity numbers from the Labor Department were also released this morning — and after the Q2 dip, productivity is once again climbed, this time at a 1.9 per cent annual clip in Q3:
In revising downward its estimate for October’s non-farm unemployment numbers from +50,000 to +25,000, Goldman Sachs gets into the details a bit more and notes a certain irony at looking at these improving productivity numbers as a bad thing (via ZH):
Productivity was firmer than expected in Q3 as hours worked rose less than indicated by the monthly data. The firm year-to-year trend, at 2.5%, illustrates why job growth is so sluggish in an economy that has grown only slightly more over the past year (3.1% overall, though 4.1% in the private nonfarm sector). Meanwhile, unit labor costs edged down in Q3 as total compensation was about in line with the 3% annualized growth rate in nonfarm output reported for Q3. Once upon a time, flat to falling unit labor costs were regarded as a good thing….
Goldman still expects the payroll numbers to show that the private sector added 75,000 jobs last month, with continued deterioration in government employment making up the difference.
Related links:
Duelling indicators on US unemployment – FT Alphaville
US non-farm payroll numbers – down by 95,000 – FT Alphaville