While most news reports yesterday focused on the Congressional Budget Office's forecast for the unemployment rate--namely, that it's likely to peak above 10 percent--there's some better news a little deeper in the report.
However, small signs of potential improvement in the labor market have emerged.
The four-week moving average of initial claims for unemployment insurance has
eased slightly, from 659,500 in the week ending April 3 to 630,050 in the week ending
May 8. Initial claims for unemployment insurance may be useful as
a leading indicator because, in the past five recessions, that number has typically
started to decline at about the time the recession was ending. The number of claims
responds more quickly than other employment indicators to changes in labor market
conditions because the data pick up changes in flows into unemployment, rather than
increases in employment. Although the data can be erratic, other information on the
labor market (such as surveys of hiring plans, layoff announcements, and perceptions
of the availability of jobs) also indicate some improvement in employment conditions.
Claims data is a little too volatile to be given much weight on a weekly basis, but it could be very useful to keep an eye on over the next few weeks.