The number of new jobless claims fell to a seasonally adjusted 334,000 last week, down 24,000 from the week before according to the U.S. Labor Department. Economists say that the change reflects seasonal shifts in employment, not a permanent boost to the economy, Annalyn Kurtz from CNN Money reports.
Because new jobless claims are reported on a weekly basis they are subject to high volatility and what looks like a spike or drop in job numbers may simply be noise. Most economists prefer to look at four-week averages to reduce the variance in their numbers, but that measure also dipped last week. The four-week average of new jobless claims has fallen steadily in recent months and is now approaching 2008 levels.
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Car manufacturers less likely to close for summer
Part of the reason it is difficult for economists to judge the importance of job numbers in July is that the auto industry used to shut down their plants in early July for maintenance and refitting, getting ready to build next year’s model of cars. This practice has changed over time, with many plants either reducing downtime or eliminating plant closures altogether.
“One must be wary during these months, given the annual auto plant shutdown,” said BMO Capital Markets senior economist Jennifer Lee.
Workers are routinely laid off ahead of these plant closures, and states with a strong auto manufacturing industry such as Michigan, Indiana and Ohio saw a rise in jobless claims last week. Putting the jobs numbers into an appropriate seasonal context is complicated by these trends because it becomes harder to determine how many of the layoffs are temporary and how many reflect underlying economic shifts.
Meaning of the jobless claims unclear
The seasonally adjusted figure, 334,000 jobless claims, may be factoring in an event that no longer occurs, or occurs at level much lower than a simple historical analysis would suggest. That means that there are more permanent jobless claims than would be indicated by the Labor Department’s most recent report.
Even though the actual meaning of his report may be unclear, investors have reacted positively. Stock markets opened higher than expected and some have suggested that the stronger job numbers could give Bernanke a reason to taper QE sooner rather than later, Reuters reports.