(Chart by MB)
The Department of Labor
reported a sharp drop of 24,000 in initial claims for unemployment benefits for the week ending July 23, the first good news in that arena in four months. At 398,000, it was the lowest level since April 2. Expert consensus was that claims would be about the same as the previous week.
The four-week running average, which analysts consider a better measure because it smoothes out volatility, fell to 413,750, a drop of 8500 over the previous week.
Economists traditionally have viewed claims below 400,000 as an indicator that jobs are being added at a healthy pace. In the past two months, they have been far from that, with only 43,000 new jobs created in May and June. Whether that pitiful pace continued in July will become known when the Labor department's much-watched monthly jobs survey comes out next Friday. The comparative good news in today's initial claims report won't be reflected in those numbers because the jobs survey closes its data gathering around the 12th of each month.
Anecdotal news Wednesday from the latest Beige Book, a summary of economic data by region published eight times a year by the Federal Reserve Board, indicates that the coming jobs report will not show much improvement:
Reports from the twelve Federal Reserve Districts indicated that economic activity continued to grow; however, the pace has moderated in many Districts. The six Districts nearest the Atlantic seaboard reported a slowdown in activity since the previous Beige Book report; activity was little changed in the Atlanta District and unchanged or slightly improved in the Richmond District. Of the other six Districts, the Minneapolis District reported political and weather-related disruptions that temporarily slowed growth, and the Dallas District slowed to a moderate pace of growth. The remaining four Districts continued to grow modestly. […]
Labor market conditions remained soft in most Federal Reserve Districts. Employment, especially among temporary hiring agencies, improved in the Richmond District in recent weeks. Modest hiring increases, often within specific sectors such as advertising in the Boston District and manufacturing in the Cleveland District, contributed to modest overall employment gains.
That news helped knock the stock market down nearly 200 points Wednesday and is more evidence that Friday's report on the growth in gross domestic product for the second quarter of 2011 will be dismal, perhaps even below the 1.6 percent to 1.9 percent range that various analysts are predicting.