The weekly figure and the recent trend are analogous to taking the cholesterol, blood pressure, respiration and the pulse of the economy.
Why? Because falling layoffs are an indication that business activity is picking up, as employers are reluctant to lay off workers they will need to smoothly process an uptick in sales.
Conversely, rising layoffs are a solid indication that new customers aren’t coming through the door, and current customers, if not cutting back, are reluctant to ramp up new orders.
That’s why the recent rise in jobless claims has been discouraging. And Fed members must be a bit jittery at this point as they get set to end QE2 purchases in about four weeks.
Weekly initial jobless claims rose to 424,000, up from an upwardly revised 414,000 in the prior week. The 4-week moving average slipped by 1,750 to 438,500, while continuing claims fell 46,000 to 3.69 million.
The latest numbers aren’t signaling that growth is coming to a standstill, but the already modest economic recovery has lost momentum despite heavy stimulus from the Fed and the government.
Interest rates remain at rock bottom levels, the Fed has poured trillions of dollars into the economy, the government ramped up spending, payroll taxes have been cut, yet millions remain unemployed.
Credit standards at banks, however, are still tight, and consumers, who are already laden with debt, just aren’t comfortable loading up on even more credit.
Given the state of the housing market, falling home prices, job insecurities and a banking system that’s still on the mend (and let’s not forget the spike in gasoline prices), it’s not a surprise that this recovery has not responded to the shock therapy that would typically spark a healthy recovery.
And it may be a while before the excesses of the past decade or two are finally wrung out of the system.
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