Jobless Claims Data Raise Level of Concern
Initial jobless claims rose 8,000 to 480,000 for the week ended January 30. The four-week moving average is up a little over 20,000 in a span of two weeks (468,650 vs. 447,000 for week ended January 16). Continuing claims, which lag initial claims by one week, are holding nearly steady at 4.6 million. The insured unemployment rate was unchanged at 3.5%.
Considering claims under the emergency programs, total continuing claims have moved up to 10.455 million during the week ended January 16. The tally of total continuing claims, which include regular continuing claims and those under emergency programs, lag initial jobless claims by two weeks. The upward trend of both initial jobless claims and total continuing claims has raised the level of concern about labor market conditions one notch. The January employment report, to be published on February 5, will offer useful insights. Payrolls fell 85,000 in December after a gain of 4,000 in the prior month. The jobless rate is predicted to have risen to 10.2% in January, while a decline in payrolls is nearly certain. The Labor Department will be publishing benchmark revisions of payroll employment going back to January 2005 on February 5 along with employment estimates for January.
Productivity Posts Impressive Gains, Labor Costs Remain Contained
Productivity of the U.S. economy rose 6.2% in the fourth quarter of 2009, putting the year-to-year increase at 4.3%. Productivity is strong at turning points of a business cycle. Therefore, the gains seen in the last three quarters are not atypical.
Unit labor costs fell 4.4% in the fourth quarter, while the year-to-year decline was 3.6%. Unit labor costs track the core Consumer Price Index (CPI) very closely (see chart 4). The recent downward trend of unit labor costs suggests that there is no imminent inflationary threat and it allows the FOMC to focus on economic growth in the inflation-growth debate.
