Jobless claims rose while unemployment announcements were low

Initial jobless claims were higher than expected, rising 13,000 to 472,000 in the week ending June 26th. The four-week average of claims increased 3,250 to 466,500.

Challenger reported that the rate of layoff announcements was little changed in June with 39,358 job cuts announced compared to 38,810 in the prior month. Layoff announcements in June 2010 were 47.1% below June 2009’s level (the data are not seasonally adjusted).

BOTTOM LINE

The jobless claims data remain the weakest indicator of labor market activity. On the face of it, the rise in the four-week average to the highest level since the beginning of March points to a weakening in the labor market and a potential decline in private payrolls. However, layoff announcements paint an entirely different picture of the job market and the divergence between the two indicators is something of a conundrum. We will have to leave it, therefore, to Friday’s employment report to write the narrative for the June labor market and we still look for a modest 75,000 increase in private payrolls. Nonetheless, we find the level and direction in jobless claims somewhat troubling and the increase is likely to feed double-dip fears. As we move into July, we typically see claims distorted by summer factory shutdowns, especially in the auto industry, and it might be a few weeks before we get another clean reading on jobless claims.

In the first six months of 2010, layoff announcements totaled 297,677, a 66.8% decline from the first six months of 2009 and the lowest number of layoff announcements for the first half of a year since 2000. Layoff announcements remain near the lowest levels in a decade.

Source RDQ

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