Initial jobless claims for the September employment survey week declined -3k to 382k. However, the four-week moving average rose +2k to 378k. These claims results are consistent with “more of the same” for the labor market, even after accounting for a modest bump higher in the numbers due to the effects of Hurricane Isaac—which was cited in the prior week’s report. Claims are now in the upper band of their range for the year (352k to 392k). Continuing claims fell -32k to 3272k following a -28k decline in the prior week.
These data indicate that the labor market (and broader economy) continue to struggle to gain momentum. Most analysts are still forecast September employment numbers of +110k with no change to the unemployment rate at 8.1%. The September employment report is the second to last report ahead of the election, although it is arguably the most important because it will
shade the tone of the economy during the presidential debates—the October data (reported on November 2—just four days ahead of the election) are probably too late to significantly sway public opinion.
At present, consumer sentiment appears to be improving despite the fact that nonfarm payroll gains have averaged +97k over the past six months, down from +205k over the prior six months. In fact, the preliminary U. of Michigan consumer sentiment index was near its post recession high this month even though the unemployment rate remains stuck above 8.0% (as it has for the past three years).
Bottom Line: The U.S. labour market continues to struggle to gain momentum. U.S. initial jobless claims fell a less-than-expected 3,000 to 382,000 in the September 15th week. This is up 8,000 from the August payrolls survey period, suggesting no improvement on the modest 96,000 advance that month. The slight decline did not even retrace the prior week’s 9,000 boost from Tropical Storm Isaac. There were no special factors influencing the report this week, including the Chicago teachers’ strike. The 4-week moving average rose modestly to 377,750, the highest since late-June, and above the norm of earlier this year when the labour market was seeing healthy job growth. The insured unemployment rate stayed at 2.6%, where it’s been since March, suggesting no underlying improvement in the unemployment rate. At least continuing claims are trending down, easing to 3.27 million in the prior week, though likely because more claimants are exhausting their benefits rather than finding work. No wonder the Fed kept the QE3 expansion door wide open.”
Deutsche Bank notes some positive trends with tax receipts:
Consumers have remained resilient because income growth continues to be positive. Withholding tax receipts provide critical information on the underlying income trend. Tax receipts are one of our favorite metrics of economic activity, because people do not pay tax on phantom income. Thus, unlike most economic data series, tax receipts are never revised. Furthermore, the data are timely since they are released daily from the Treasury Department (with a one day lag). Recently, the growth in tax receipts corroborates continued, albeit modest, income creation. Last quarter, tax withholdings grew 3.4% from their year earlier level compared to 5.1% in Q1. While the pace through Q2 was modest, households are still generating positive nominal income gains. In fact, the latest data for the current quarter show receipts growing at a healthy +4.9%. (See chart below.) This is likely why consumer spending has rebounded in the first two months of the current quarter. By no means is the economy booming, but continued labor income growth similar to the current pace suggests that a recession is not imminent. We will be watching to see if the upcoming employment data corroborate this view.
