Initial claims for Americans applying for first-time unemployment insurance edged lower to 234,000 for the week ended February 2. Despite a decline of nearly 20,000 from 253,000 in the preceding week, claims were still meaningfully above expectations for 221,000. The four-week moving average rose to nearly 225,000, up by 4,500 from the prior week. Still, despite that recent surge, current claims remain well below 300,000 – a key threshold generally indicative of a healthy labor market.
Under different circumstances, such a sizable increase in claims in a short period would be a concerning sign, particularly if it was sustained. In this case, rising claims should be viewed in the context of the cause. The layoffs weren’t a direct byproduct of deteriorating business conditions and diminished need for workers in cyclically sensitive parts of the economy. On the contrary, the private sector added nearly 300,000 jobs in January, including robust gains in construction and manufacturing.
The swell in claims appears to be largely tied to political conditions in Washington and the resulting shutdown of the Federal government. Jobless claims had been running near half-century lows before 800,000 federal government workers were sidelined for most of January. Those furloughed workers are not reflected in the weekly claims numbers, but government contractors who were also affected are included.
The good news is that shutdown has now ended, and the impact on labor markets is likely to be short-lived. The bad news, of course, is that it could happen again.
The bottom line is that the recent surge in jobless claims is unlikely to be sustained and should be viewed within the context of a broader mosaic of economic data. The economy has slowed in recent months, but still appears to be growing at a respectable pace. Labor market conditions remain quite positive – good news for workers, for the consumer sector, and the economy more broadly.
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