For five years I have been cautioning against reading too much into the U.S. weekly initial jobless claims readings, but there is in fact a trend. Behind the various ups and downs that the financial press has tried to latch on to along the way, there is a decline, with fewer people applying for unemployment as time goes on. It is a slight decline, about 800 per week over the past five years, impossible to pick out in the short term from a number that fluctuates by 10,000 or more from one week to the next, but easy to see if you look at six months or more all at once. Many observers have been waiting to see weekly initial jobless claims fall below 300,000. When that happened in July it was possibly a fluke, but it’s happened five more times since.
Initial jobless claims is mainly a proxy measure for staffing cuts by financially distressed businesses. It is now at a level that is consistent with a strong, healthy job market. Obviously, in other ways that are more important, the U.S. job market is not so strong as we would hope, but the problems are not stemming from large numbers of employers that find themselves overextended. The job market is still sluggish, and as it (we can hope) gradually returns to a normal level of movement, that will tend to keep weekly initial jobless claims up near its current level, probably eventually rising above 300,000. But it depends. The job market has changed and some employers are trying to be quicker in their hiring. In theory, that could keep unemployment claims down as more workers who are losing their jobs are hired for new jobs before they have a week of actual unemployment.