March 23, 2017
Initial unemployment claims rose 15 thousand in the week ending March 19 to 258 thousand after having declined 6 thousand in the previous week. Because these weekly data can be volatile the focus should be on the 4-week moving average of claims (shown above), which is a less volatile measure. It rose 4 thousand to 243 thousand. The late February average of 234 thousand was the lowest level for this series since April 14, 1973 — 44 years ago!
Ordinarily, with initial unemployment claims (the red line on the chart below, using the inverted scale on the right) at 265 thousand we would expect monthly payroll employment gains to exceed 300 thousand. However, employers today are having difficulty finding qualified workers. As a result, job gains are significantly smaller than this long-term relationship suggests and are currently about 170 thousand.
With the economy essentially at full employment, employers will have steadily increasing difficulty getting the number of workers that they need. As a result, they will be forced to offer some of their part time workers full time positions. This series is still high relative to where it was going into the recession.
They will also have to think about hiring some of our youth (ages 16-24 years) . But the youth unemployment rate today is lower than where it was going into the recession so there may not be too many younger workers available for hire.
Finally, employers may also consider some workers who have been unemployed for an extended period of time. But these workers do not seem to have the skills necessary for today’s work place. Employers may have to offer some on-the-job training programs for those whose skills may have gotten a bit rusty.
The number of people receiving unemployment benefits declined 39 thousand in the week ending March 11 to 2,000 thousand. The four week moving average fell 16 thousand to 2,043 thousand. The low for the cycle for this series was 2,024 thousand back in November of last year. The only way the unemployment rate can decline is if actual GDP growth exceeds potential. Right now the economy is climbing by about 2.0%; potential growth is projected to be about 1.8%. Thus, going forward the unemployment rate will decline quite slowly.