Is the Job Market Cracking?

The surge in jobless claims may not be as worrisome as it first appears.


Initial jobless claims, just about the best real-time indicator of the health of the labor market, jumped last week by 69,000 to 375,000. That pushed the four-week moving average to 326,000. Is the labor market finally cracking? If so, I think even the biggest bulls would toss in the towel and predict a recession. But we may not be there yet. A few opinions from around Wall Street. From the econ team over at Action Economics:

Today's initial claims surge captured the attention of the markets, though the pop is likely part of the seasonal gyrations that have plagued these figures over the last three months, especially given the late MLK holiday. The gain leaves an average reading thus far in January of 326k that is still below what we continue to see as a 335k-340k trend-reading for these figures over this three month period.

From Brian Wesbury and Bob Stein at First Trust Advisors:

In other news this morning, new claims for unemployment benefits soared to 375,000 last week from 306,000 the week before and 300,000 two weeks ago. Recent gyrations in the claims data are likely due to problems with seasonal adjustments, with the truth about the labor market somewhere in between. The 4-week moving average of claims is 325,750. This level signals continued growth in payrolls.

From Abiel Reinhart at JPMorgan:

The size of the latest increase in claims may have been boosted by two factors. First, weather swung from being much warmer than normal two weeks ago to being much colder than normal in the latest week; the size of the two-week swing was in the fact the largest in the ten-year time span for which we have weekly temperature deviations. Second, the latest week included the Martin Luther King, Jr. holiday. This week has sometimes seen large moves. While we continue to expect payrolls to gain 100,000 in January, the latest claims data raises the risk that things could turn considerably weaker in the February payroll report.