Jobless claims higher than expected and show no signs of slowing down

Initial jobless claims were again higher than expected, rising 2,000 to 484,000 in the week ending August 7th. The four-week average of claims increased 14,250 to 473,500.

BOTTOM LINE

The level of claims at the beginning of August is a somewhat worrying sign to us about the strength of the labor market and the recovery in the middle of the third quarter. We must remember that claims are volatile and we are coming off an unusual seasonal pattern in the first half of July. However, having said that, there appears to be no identifiable technical factor behind the recent rise in claims. The next claims report is for the week of the payroll survey and will be of particular interest both for that reason and because another reading in the 480,000 area would be difficult to dismiss on the grounds of volatility. We may be witnessing something of a re-run of late-2002/early-2003 when claims drifted up from the 400,000 area to 425,000 as the labor market struggled to find its footing. The rise during this period did not herald a double dip in the economy, but payrolls rose only intermittently during this period. We must also remember that the layoff announcement data paint an entirely different picture of job losses than the unemployment claims data and that the July ISM surveys for employment were reasonably solid. Nonetheless, color us concerned about the risk of a weak August employment report at this point.

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