While it still doesn’t completely wipe away the tepid job-creation data for last month, Thursday morning’s report on last week’s jobless claims suggests the labor market may not be quite as weak as some had been led to believe.
Ergo, the U.S. economy — and by extension, the stock market — may also be healthier than some of the recent numbers would imply.
The mixed message merits a detailed look at all the recent labor market data.
Jobless Claims Plunge Last Week…
Just in the interest of clarity that was strangely missing from the commentaries posted regarding Thursday’s jobless claim numbers, the plunge didn’t come from the initial unemployment claims (first-time benefits requests of the newly-unemployed) figure.
Although that figure was still impressively low, the buzz was actually regarding the sizable dip in the number of continuing unemployment claims, which includes new filers as well as all those who had already been approved to receive unemployment benefits. That latter figure fell to a 15-year low of 2.304 million.
That being said, the initial jobless claims figure of 281,000 is still quite low. The four-week moving average of that volatile weekly number suggests the labor market continues to make progress.
Jobless Claims, Initial and Continuing
Based on these numbers alone, it would be easy to conclude the U.S. economy is on the right track and the stock market is headed higher. As is usually the case, though, there’s more to the story.
… But the Labor Market Isn’t Exactly “Strong”
While jobless claims continue to slide, boding well for the stock market, bear in mind the weekly numbers supplied by the Department of Labor don’t tell the whole story.
Specifically, the ongoing unemployment claims figure of 2.3 million two weeks ago does not include employed people who have part-time jobs only because they can’t find full-time work, and it does not include those who have seen their unemployment benefits expire and have simply stopped asking for their unemployment check.
There are 6.7 million individuals with part-time jobs who would like to work more, and another 2 million who are only “marginally attached” to the labor force. And there are still 6.4 million individuals who are not being counted in the labor force, but would still like a job.
To be clear, those not-officially-counted numbers are falling, too, but the spread between the touted numbers and the total numbers is still wider than the historical norm.
In that light, last week’s report of only 126,00 newly-created jobs for the month of March isn’t quite as strong as Thursday’s headlines suggest.
Nonfarm Payroll Growth Through March
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All the different ways of poking and prodding the labor market data admittedly make it tough to know how to interpret Thursday’s jobless claims figures, but there is one overarching way to measure the health of the U.S. economy via the labor market. It’s a look at what portion of the total population is in the labor force (working or not), and what percentage of the labor force is actually working at this time.
Even so, these numbers continue to give investors a bit of a mixed message.
As of March, the labor force participation rate — the number of people holding or looking for a job — was still near a multi-year low reading of 62.7%. Conversely, the employed-to-population ratio data says 59.3% of the U.S. population is working, up from readings near a low of 58% in 2011, when participation was at its worst.
Although we’re still at low historical levels in terms of total employment as a percentage of the total population, that figure is clearly getting better. The labor force participation rate, however, isn’t improving.
Labor Force Participation and Total-Employment Rates
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The disparity can be partially, though not entirely, explained by the ongoing migration of the baby-boomers out of the work force. Regardless, there’s room for necessary improvement in the employment-to-population ratio.
On the Right Track, But Not at Speed
Don’t misinterpret the data as reason for pessimism, and don’t dismiss Thursday’s encouraging jobless claims numbers. Every little bit helps, and in many ways progress builds on progress, as even a few more employed workers will incrementally strengthen the U.S. economy, which in turn puts a few more people back to work, and so on.
Thursday’s data isn’t a game-changer for the labor market though. It’s just a step in the right direction.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
