Economists seems to be having a difficult time sorting through the recent downward trend in jobless claims. On the surface, the news looks good. Benefit applications, which have been trending lower from a 26-year peak of 674k in March, fell to a nine-month low of 521k this week. Continuing claims also eased, and are now hovering just above 6 million.
On the one hand, this suggests the October employment survey could be a bit better following a September disappointment, particularly considering this is survey week for payrolls. At the same time, there are continued reasons to worry. JP Morgan’s Abiel Reinhart had this to say:
Claims are at their lowest level since the start of the year, although the level is obviously still high. To date, the four-week average of jobless claims is down 24,500 from the September payroll survey week, which is good news on the employment front. The downward trend in claims does suggest that payroll losses could moderate again in October. The insured unemployment rate fell to 4.5% from 4.6%. The fall in insured unemployment suggests that overall unemployment is approaching its peak.
Others aren’t sure the story is all that rosy. They worry that, given the time limitations on benefits (and despite their extension as part of Obama’s stimulus), many Americans are simply falling off the jobless rolls because they no longer qualify. Jan Hatzius et al at Goldman write:
A small step — not a giant leap — given the volatility of these data and the ongoing likelihood that the downward drift in continuing claims still represents exhaustions of eligibility for regular benefits more than actual rehiring.