By: Capital Spectator
If the euro crisis represents a threat to the U.S. economy (and it
does), it's not putting upward pressure on new jobless claims--at least
not yet. New filings for unemployment benefits dipped again last week
to a seven-month low of 388,000 on a seasonally adjusted basis. We're
still not at the post-recession low reached in this cycle (375,000 in
late-February), but the old trough is now within shouting distance.
Will the troubles in Europe derail this progress? It's premature to
say for sure. Much depends on what policy makers do next. But here in
the states, there's a fresh data point that promotes cautious optimism
that maybe, just maybe, the labor market in the U.S. is headed for
sustained if only moderate healing. Assuming, of course, that the euro
debacle doesn't explode (and that's by no means a given). The coming
days and weeks will surely be critical for deciding if this glass is
half full or cracked and leaking.
"The U.S. economy continues to show signs of strong momentum," says
Millan Mulraine, a senior macro strategist at TD Securities. "The
improvement in claims underscores that the gains in labor market
activity over the past few months are being sustained."
I'm reluctant to say that jobless claims are now on a sustained
downtrend, but the odds certainly seem to improving for this
long-awaited virtuous cycle. It's been clear for the last month or so
that the economic activity in the U.S. has revived after moving close to
stall speed in September. Deciding how much of the recent pop is due to
stronger growth vs. pulling away from the edge is still debatable. Even
if the euro crisis could somehow be solved tomorrow, the old problem of
minting jobs is still with us.
"Layoffs have eased, which is a great sign," says
Omair Sharif, an economist at RBS Securities. "The other side of the
equation, however, is that firms are still very hesitant to hire. You're
getting a very gradual improvement in the labor market."
Gradual progress is obviously better than a shrinking labor market,
but we're still a long way from creating jobs at a rate that will pull
the economy out of its mediocrity. Yet job
growth is essential at this
stage for repairing another potential trouble spot: the mismatch
between growth rates in consumption and income. The cure is fatter
payrolls. Today's jobless claims report suggests we might actually see
more improvement on this front, assuming the European Central Bank keeps
the euro contagion from spreading. But as I wrote earlier, that's still a big if.
