Jobless Claims Tick Higher

Last month I noted that Jobless claims were yet to rise to alarming levels. That may have changed yesterday with the highest jobless claims number for about 8 months. From marketwatch.com

Number of Americans on unemployment nears two-year high

Continuing jobless claims - the total number of individuals collecting unemployment benefits -- rose by 112,000 in the week ending Nov. 17, to 2.66 million, the highest mark since Dec. 24, 2005, the Labor Department said.

Initial jobless claims - individuals applying for unemployment benefits for the first time -- also shot up in the latest week, the data show. Those claims rose by 23,000 to 352,000 during the week ending Nov. 24, their highest level since Feb. 10.

"This is the first time initial claims have broken 350,000 since February and thus perhaps an early sign of a more severe deterioration in the labor market," said Andrew Gledhill of Moody's Economy.com.

"At the moment, these two indicators are consistent with weakening labor market conditions," said Joshua Shapiro of MFR, Inc.

The four-week moving averages for both initial claims and continuing claims also edged up in the latest surveys. The four-week average of initial claims rose by 5,750 to 335,250, the highest since March 3. The continuing claims average climbed by 20,500 to 2.59 million. That number was the highest since Jan. 1, 2006.

Economists say the averages are a better indicator because they smooth out one-time events like holidays or strikes.

The graph above is the 4 week average of initial claims. As you can see it is hardly recessionary yet but it is starting to move up toward that 350,000 range. A few more weeks of 350,000 initial claims would lend support to a further deterioration in employment growth.

The Fed will be watching jobless claims as well as next week's NFP report for signs that they need to cut interest rates on December 11th. The bond market already has a quarter point baked in and is moving toward 50bps. Fed speak over the last few days also lends credence to the bond market's predictions. It will be an interesting couple of weeks between now and the next Fed meeting.