The only important data on the U.S. economy released this morning is a report from the Department of Labor which showed that seasonally adjusted initial jobless claims totaled 294K in the week ending May 07. This is an increase of 20K compared to the prior week, significantly worse than expected, the third week-over-week increase in a row, and the highest initial claims reading since February of last year. This is definitely a disappointing report following last week’s release of weaker-than-expected April payrolls data but much of the headline increase was due to a 15K jump in New York related to the Verizon strike. Further, many economists are optimistic that this latest uptrend in jobless claims is largely a temporary side effect of the recent spike in corporate layoff announcements as companies adjust their headcounts following a slowdown in first quarter sales. Moreover, this is still the 62nd consecutive weekly initial claims reading below 300K, a string that is even better than what was seen during the late ‘90s economic expansion which had a smaller overall labor force. While there will eventually be another economic downturn in the U.S. that will likely see jobless claims rise in advance, it is important to remember that not every minor uptick in claims is a recession signal.
Sources: Econoday, Twitter, Bloomberg, U.S. Department of Labor, FRBSLPost author: Charles Couch