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Thursday, December 8, 2016

After jobless claims increased slightly in early August, the Labor Department released a new report on Thursday showing a drop in jobless claims for the week ending August 10. Jobless claims decreased by 15,000 from the previous week, marking their lowest point in almost six years.

The last time that jobless claims were as low as the 320,000 registered from August 3 through August 10 was in late 2007, before the recession started.

While jobless claims tend to decrease in the summer months, this is still a positive sign that the economy is headed in the right direction.

Steve Benen of The Maddow Blog writes, “In terms of metrics, when jobless claims fall below the 400,000 threshold, it’s considered evidence of an improving jobs landscape, and when the number drops below 370,000, it suggests jobs are being created rather quickly. At this point, we’ve been below 350,000 in 14 of the last 19 weeks.”

The diagram below from The Maddow Blog displays just how much jobless claims have dropped since the start of the stimulus in 2009:

jobless claims chart 6 year low

In an interview with The Wall Street Journal, Ryan Sweet of Moody’s Analytics discussed why jobless claims remaining below 350,000 is a great indicator of economic growth. “I think it’s a signal that the job market is continuing to heal, I think it also signals that GDP growth is picking up in the third quarter,” Sweet said. “If claims remain below 350,000 they’re going to be pretty boring over the next few weeks which is exactly what we want to see.”

In the same interview, Sweet warned of placing too much emphasis on these reports since the reports tend to be rather unpredictable. “You want to take each week of jobless claims with a grain of salt, I mean, they’re very volatile,” he said. Sweet attributes this volatility to the temporary closure of auto plants and the fact that the reports are released so frequently.

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