Jobless claims declined last week by 7,000 to a seasonally adjusted 340,000, which is near a post-recession low. Meanwhile, the four-week moving average for claims broke through the previous floor and touched a new cyclical low last week. The four-week average slipped to 348,750 on a seasonally adjusted basis—the lowest in five years. That's a fairly potent clue for expecting that the labor market will continue to grow in the near term.
The downward momentum in this series appears to have found a second wind lately. The sideways action that prevailed in recent months has given way to a new round of declines.
Reviewing the year-over-year change in the raw (unadjusted) claims data tells a similar story. New filings for weekly jobless benefits last week dropped 9.5% from the year-earlier level. In fact, year-over-year declines, with only a few exceptions, have been the norm all along. When the annual change is positive, and the ranks of the jobless are rising, we’ll have a dark signal to ponder for the business cycle. But there’s no sign of trouble by that standard, as the next chart reminds.
Jobless claims are a valuable leading index, but this series isn’t flawless. But when a broad cross section of indicators looks encouraging, it's clear that the trend is our friend. As such, today’s jobless claims report lines up rather convincingly with the growth profile via an array of economic and financial indicators, as listed in Monday's update of The Capital Spectator Economic Trend & Momentum indices.
Since I posted that update, we’ve learned that the February report on the ISM Non-Manufacturing Index delivered more positive news, with this benchmark of the services sector rising to its highest level in a year. Meanwhile, yesterday's ADP Employment Report for February reflected another month of moderate jobs growth.
Recession risk, in short, remains low, as it has been for some time. A broad review of the numbers tells us so, including today's jobless claims report. That sets us up for tomorrow's payrolls release. The preview looks encouraging, as I noted earlier today. Anything's possible when it comes to macro updates, of course. But considering the recent positive run of numbers, it seems that we're on track for a decent report in tomorrow's payrolls estimate.