Initial Jobless Claims - Leading Indicator!

Initial jobless claims fell 34,000 to 601,000 for the week ended May 2, the fourth weekly decline in the past five weeks. The peak for initial claims appears to have occurred during the week ended March 28 (674,000). The four-week moving average is down 35,250 to 623,500 from the peak on April 4, 2009. These are noteworthy numbers because initial jobless claims are part of the Index of Leading Economic Indicators which forewarn about economic conditions. Continuing claims, which lag initial claims by one week, moved up 56,000 to 6.351 million (see chart 1), a new record high; and the insured unemployment rate rose to 4.8% from 4.7% in the prior week. The mixed news from initial jobless claims and continuing claims is typical at turning points of a business cycle because initial jobless claims have peaked well ahead of continuing claims (see table 1 and charts 2-6, shaded regions denote recessions). We will be tracking jobless claims data closely in the weeks ahead as there is strong signal that the turning point of the business cycle is around the corner.

Productivity - 2009:Q1

Productivity of the U.S. economy grew 0.8% in the first quarter of 2009 vs. a 0.6% drop in the prior quarter. The gain reflects the smaller drop in output in the first quarter (-8.2%) vs. the fourth quarter (-8.8%) and a larger decline in hours worked (-9.0%) compared with the fourth quarter (-8.3%).

Unit labor costs continue to show an upward trend, the peak should occur as the economy turns the corner. Excluding the 1950s and the 2001 recession, unit labor costs peak during a recession (see chart 8). However, there is no threat of inflation given the significantly weak economic conditions.