Thursday, February 16, 2012

Still more improvement in the labor market


First-time claims for unemployment continued their descent last week, dropping to a mere 348K. It is now absolutely clear that there has been substantial improvement in the labor market. At last week's level, the ratio of claims to payrolls (what I term "workforce disruption" is now lower than at any time prior to 1997. We've rarely seen claims at such a low level relative to the size of the workforce. This must mean that firms have done just about all the cost-cutting that they are going to do. If firms have to change course because of something unexpected, it is much more likely to be in the direction of more hiring, not less, because they are already prepared for bad news. In other words, they are now vulnerable to an unexpected improvement in the economy. This is good.

3 comments:

brodero said...

The 52 week moving average of non
seasonally adjusted initial jobless
claims has broken the 400,000 level.
It is now 398,866. When this level has been broken in the past the private sector job growth in the following 3 years has resulted in 6 to 8 million new private sector jobs.

Benjamin said...

Brodero---Thanks for your insights. I find them very helpful (as I do Grannis' blog)!

Unknown said...

Yeah, thanks for that info brodero. When you mentioned that a few weeks ago I've been waiting to hear from you again.

Past 4 weeks of tax withholding receipts haven't been rising Y-o-Y as much as they did in January, but they've still got a decent rise. I suspect some of the big rise we saw in January was non-payrolls related, such as larger Wall Street bonuses or something like that.