Initial claims for unemployment provide a worrying set up for tomorrow's jobs numbers

05/03/2012 6:45 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

If you dig—and not very deeply—the initial claims for unemployment numbers released this morning are worrying. Even though the number of workers filing new claims for unemployment dropped more than expected, the trend seems to point to a slowdown in hiring gains.

For the week ending April 28 initial claims for unemployment fell to 365,000. That is down from the 392,000 initial claims filed in the week that ended April 21. (The data for that week were revised upwards to 392,000 from an initially reported 388,000.) Economists surveyed by Briefing.com had expected the claims number to drop to 375,000.

So what’s the problem? It’s the initial claims for unemployment version of the dog that didn’t bark in the night. During the week that ended on April 7, the initial claims number rose to 388,000 from 362,000 in the previous week. That started a steady climb in the four-week moving average, a better indicator of the direction of the trend than the volatile week-to-week data, to 384,000 with today’s release from 363,000 for the week ended on March 31.

The question has been what does this increase in the four-week moving average mean?

Bulls who think that the decline in the jobs market is being overstated have noted that initial claims numbers are especially volatile around the Easter holiday. So the increase in initial claims and in the four-week moving average is just a result of seasonal noise.

But that effect normally wears off in two weeks or so. Since Easter this year fell on April 8, it’s getting harder and harder to believe that the increase in initial claims is merely a result of the usual Easter effect. According to Briefing.com, there are instances where Easter has roiled the numbers for three weeks, but that is unusual. The simplest explanation of the continued climb in the four-week moving average is that the labor market is getting softer.

Not exactly what the stock market was hoping to hear as it waits for tomorrow’s report on April job creation and unemployment. The consensus among economists is that the economy created 162,000 jobs in April. That would be an increase from the 120,000 created in March, but would still fall well short of the heady days of December, January, and February when the economy was creating 200,000 jobs or more a month.

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