A 'Sensitive' Indicator — Initial Unemployment Claims — Shows Improvement
Yesterday's Labor Department report that initial unemployment claims for the week of April 4 had declined by 20,000 reminded us of a recent Knowledge at Wharton podcast with Wharton finance professor Jeremy J. Siegel. Asked which indicators he watches for signs that the economy might be on the mend, Siegel said that initial unemployment claims were first on his list. "Jobless claims are sensitive data," Siegel noted. "The first sign will be not that they're robust, but that they're not getting worse. We might actually see a reduction." Not only did the weekly claims number decline to 654,000, the four-week moving average fell to 657,250, a decrease of 750.
Siegel also monitors monthly job losses, which were 663,000 in March. "They will begin to moderate," Siegel said. "Hopefully, by the middle of the year, they will be zero or even slightly positive." Normal monthly job growth is about 200,000 "just to keep the economy growing at the rate of the growth of the labor force. But we should see moderating trends in the payroll loss and in jobless claims that tell us that the worst of the recession is behind us."
