Weekly initial jobless fell from an upwardly revised 478,000 in the prior week to 472,000, just shy of the consensus forecast offered by Bloomberg News of 470,000. The 4-week moving average, which smooths away some of the volatility in the weekly number, registered a 2,500 decline to 485,500.
The downward trend in jobless claims that began early last year came to a halt at the beginning of 2010, and even began to backup during the spring (see CHART), foreshadowing the soft patch the economy has entered.
Until companies see a more noticeable upturn in sales and begin to sense that the recovery is on a firmer footing, claims are likely to remain sticky.
Labor report in view
Attention is now shifting to tomorrow's release of the unemployment rate and nonfarm payrolls for August. A survey by Bloomberg News shows that economists anticipate an 80,000 drop in the number of jobs following a 131,000 dip in July.
Factoring out the loss of temporary positions needed for the 2010 census, a small increase of 49,000 is forecast, according to a tally by Marketwatch made at the end of last week, which is prior to ADP's report released yesterday that showed that private sector employers had shed 10,000 positions last month. Marketwatch's latest survey reveals that expectations have dimmed and just 30,000 private-sector jobs may be created.
Given that temporary jobs from the 2010 census are still skewing the data, most of the attention will be focused on private-sector.
Fed Chairman Ben Bernanke acknowledged last week that incoming data has been "disappointing," and that the drop in the unemployment rate has been attributable more to "reduced participation in the labor market than to job creation."
Consumer spending, which accounts for about 70% of GDP, perked up a bit in July, but the general trend has been a reflection of a more cautious attitude among consumers, who remain worried about job prospects.
In addition, many at the Fed noted that businesses are reluctant to expand their workforces due to "the uncertainty about future taxes, regulations, and health-care costs" (see FOMC minutes note heightened risks)."
Despite concerns that a double-dip recession may be unavoidable, companies are in much better shape financially than two years ago and have less of a need to jettison workers. And the Fed has made it abundantly clear that it will do all it can to prevent a deterioration in the economy.
For more information and a look at current issues affecting the economy: Please see Tomorrow's Economy Today. And finally a bit of good news for housing. Pending home sales moved higher in July.
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