Jobs: A Turn For The Worse?

Last week I tried to make sure we stayed calm in the face of a unemployment claims report that was worse than expected. I repeated my mantra: watch the trend not the weekly data.

Whoops.

This week’s report adds to the bad news.

Apparently new claims jumped last week by 36,000 to 482,000. Wall Street had been expecting a decline, so a big jump surprised everyone, hence the sell-off in the stock market.

There may be a ray of hope in that the data seems to be muddied by Monday’s holiday. Some states didn’t even send in data meaning that the Feds had to estimate. Plus some states that did report sent in their own estimates rather than actual data. Finally last week’s data apparently includes ‘updates’ to earlier reports and includes new claims made a week or two ago but not yet reported because the appropriate bureaucrats were on holiday. Cost cutting bites us in lost accuracy and timeliness of data gathering!

So it looks certain that this big jump is overstated somewhat: previous weeks were too low and this one is too high. Having said that the same lesson can be drawn: the improvement on the job market has been a little weaker than we originally thought. The blight of unemployment still hangs heavily over the economy.

There is little news in this other than the fact that reality is worse than the constantly rosy outlooks being peddled in the financial media. They, of course, are trying to sell stocks and bonds, so they have a natural tendency to look for good news. They also overreact to bad news.

Today’s report suggests we should all stay in the middle: don’t get excited over the recovery; but don’t think the bottom has fallen out again. Neither is true. Instead we are stuck at the beginning of a long and painful recovery during which job creation will be poor.

I am waiting for a Washington response to this. Then again I have been waiting for a while.

Disappointment seems to be the only thing they deliver well.