Ouch! Rotten Jobs Report.

That will teach us. Never get too carried away with optimism. The economy is still struggling mightily. This morning’s report on new claims for unemployment assistance was awful. There is no way around the bad news. Claims jumped up 21,000 to 471,000 last week, ending a short string of weeks where things had been moving in the right direction. This bad move just about undoes all the good work so far this spring.

Ugh.

The economy is simply stuck in ‘no jobs land’.

The good news, which is getting tired, is that claims are way off the levels they reached last year. They are down about 25% in the last twelve months. But they are up 3.6% from the point they reached late last year. That’s just rotten.

This backsliding is coming even as GDP is growing at a decent pace. From a non-jobs and strictly technical perspective, the recession is long over. When the folks who set the date officially get around to announcing it, I expect the end of the recession to be pegged early this year.

So the big question is why aren’t jobs more abundant?

The answer is very murky. It seems very probable that businesses just don’t want to hire even though activity is picking up. Every measure we have is showing improvement at the moment. And growth is across the board, not concentrated. The vast slack in the economy is obviously sufficient to absorb the rise in activity, which adds emphasis to the enormity of the shock the banks delivered to us.

Plus, as I have repeated here often, recessions caused by financial crises are far more difficult to fix because one of the engines of recovery – the flow of credit – is impaired. This is why I have consistently argued against the more optimistic forecasts for growth this year.

Having said that: the Federal Reserve Board just this week revised upwards its forecast for GDP. This revision was based on the flow of data that suggests a more robust recovery is under way. The Fed is now looking for growth in the mid to high 3% range.

So what should we think?

In view of the large amount of evidence that the economy is well on the way towards recovery, I think we need to be careful with the jobs data. This morning’s report is clearly bad news, but it may turn out to be an aberration. Let’s hope so.

So we should remain cautious. Growth is here. Jobs are not. Yet.