Recent improvement in jobless claims stalls

Weekly initial jobless claims jumped by 20,000 last week to 457,000, about 15,000 above the forecast issued by Bloomberg.  The 4-week moving average increased 2,000 to 456,000, while continuing claims, which have been skewed by extended jobless benefits, fell 42,000 to 4.4 million.



Jobless claims can be difficult to interpret on a week by week basis because of the volatility in weekly numbers. But the 4-week moving average, which smooths away much of the volatility, rose last week, suggesting that recent improvement in claims may have come to an end, at least for now.

That means claims are still stuck in the narrow range they have been in for over a year.  I’ve harped on this in the past, but what’s needed is a pick up in economic activity.

The Fed just announced a new program to buy Treasury securities in the hopes of lowering longer-term interest rates and boosting activity.  However, monetary policy has lost much of its sting since short term rates are at zero.  In response to the Fed’s action, the dollar has been falling, commodity prices have been rising and stocks are up.

The Fed may not have a direct impact on the economy, but higher stock prices and the benefit to the economy in the form of the wealth effect may gradually boost growth. Risks, however, include higher inflation.