Weekly jobless claims are an excellent barometer of business confidence and offer plenty of information about what is going on in the economy.
That’s why the recent drop is a concrete sign that the economy is not poised to enter a new recession, but any excitement should be balanced against indications that issues with the data may be responsible for the recent decline.
In the latest week, weekly initial jobless claims fell 3,000 to 450,000, the lowest reading in two months. The 4-week moving average declined 13,500 to a 464,750.
On the surface this is definitely good news, though keep in mind, weekly claims are now at the bottom of the range they have been in since the start of the year. From that standpoint, there has been little progress.
Digging a bit deeper, the 54,000 decline in the weekly figure over the past four weeks may have more to do with data collection issues than an improving economy.
According to Bloomberg News, "Delays surrounding Labor Day, both administrative delays on the government side and delays for those filing claims, may be holding down the total.”
We’ll likely know in the next few weeks whether the drop is for real or has been more of an illusion brought on by quirks in the filing process.
If claims settle in around 450,000 over the next few weeks, odds of a double-dip recession will recede. Still, we won’t be seeing real progress until claims fall below 400,000.
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