Initial jobless claims are a measure of the number of individuals filing for unemployment benefits for the first time. Surprisingly, the number of claims was much better then expected yesterday at 509k versus the consensus of 540k claims filed. Does this mean we are starting to turn the corner?
We are not that optimistic. There are many factors to consider in this report especially the timing. As we are approaching the the holidays, many retail companies will retain employees up until the last moment of the season, hoping to serve as many customers needs as possible. Odds are that we will begin to see a significant increase in layoffs after January 1.
(Chart Source: Economy.com)
The upside surprise of Thursday’s number does not negate the fact that the trend is moving towards historical recessionary levels. Back in 2000, we had seen higher numbers of claims after the bursting of the internet bubble burst in 2000. But remember, this “slowdown” is far from over.
In the short run, we are not seeing any indications that jobless claims will fall as daily news of increased layoffs are occurring and more are expected across the board. With that said, the unemployment rate is expected to reach 6.8% today. That also seems to be somewhat optimistic.
Stay tunes, as if the report is even the slightest amount over, markets will panic. Watch for revisions on this one, they are bound to be moved up.
Mass Layoffs (BLS Data)