It’s not terrible, but today’s updates on layoffs for April imply that growth is fading for the US labor market. Deciding if the deceleration will roll on–or give way to firmer numbers–is unknown at this point. Until or if upcoming releases bring deeper clarity, for good or ill, it’s still reasonable to assume that modest growth is the path of least resistance. But this morning’s numbers follow yesterday’s surprisingly weak profile of US private-sector payrolls via ADP’s estimate. The negative news is partly offset by upbeat survey reports for the US services sector for April. Nonetheless, the employment data isn’t moving in the right direction at the moment. Will tomorrow’s official job report for April tell us otherwise? Yes, according to the consensus forecast via Econoday.com. While we’re waiting for Friday’s news, let’s dig into the details on the latest figures for jobless claims and job cuts.
New filings for unemployment benefits jumped 17,000 last week to a seasonally adjusted 274,000, the Labor Department reports. Although claims are still low by historical standards, last week’s increase is the biggest weekly advance since late-January, pushing filings to a five-week high.
It could be noise, of course, but it’s harder to dismiss the rise in the year-over-year data in unadjusted terms. Claims increased nearly 3% last week vs. the year-earlier figure—the first annual rise since late-March. Yes, it could be an isolated event. But an ongoing rise in annual terms would be worrisome. Stay tuned.
Meantime, so-called job cuts accelerated last month to just over 65,000, according to Challenger, Gray & Christmas (CGC), an outplacement firm. That’s the highest monthly total in three months, although the year-over-year trend eased to just under a 6% gain through April.
“We continue to see large scale layoffs in the energy sector, where low oil prices are driving down profits. However, we are also seeing heavy downsizing activity in other areas, such as computers and retail, where changing consumer trends are creating a lot of volatility,” said John Challenger, chief executive officer at CGC.
Let’s be clear: there’s no smoking gun in today’s results. Even when considered with the weak ADP data for April, the latest numbers fall short of generating a reliable signal for projecting a new US recession. That may be coming, but it’s going to take a continued stream of weak numbers in the days ahead to tip the scales decisively to the dark side.
“If [jobless claims] trend higher for a few weeks, then we start to worry, but we’ve been steadily lower,” said Gennadiy Goldberg, a US strategist at TD Securities, via Bloomberg. “The US economy may not be growing at 3 percent, but we’re continuing to muddle along, and that’s still creating a demand for labor.”
The next reality check arrives in tomorrow’s April report on payrolls from the Labor Department. For the moment, the crowd’s expecting good news. If an upbeat outlook turns out to be misguided, the crunching sound you’ll hear will be the clatter of managing expectations down another notch or two.