We received another piece of good news about the economy on the final day of the year. Weekly jobless claims fell 22,000 in the latest week to 432,000, well south of the Bloomberg forecast of 460,000 and the lowest level in almost 18 months.
The 4-week moving average continued in a downward trend, dropping 5,500 to 460,250, and continuing claims slipped 57,000 to 4.98 million.
Recognizing that seasonal adjustments can sometimes be difficult this time of year, the steady decline in weekly jobless claims is impressive and is one of the clearest indications that the economy is on the mend.
The drop in layoffs not only reflects rising optimism among businesses but it also shows that the worst losses in nonfarm payrolls are behind us. Still, fewer job cutbacks by employers do not necessarily portend a rise in employment, at least at this point in the business cycle. But it is a prerequisite to job creation.
We’ll need to see steady increases in aggregate demand before the economy begins to create new jobs.
Unfortunately, a falling unemployment rate and rising nonfarm payrolls are among the last economic statistics to show improvement after a recession.
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