Faidy Jacques, 53, hands his resume to a job recruiter at a job fair in Melville, New York
The state of the U.S. job market has created a lot of angst for investors since the recovery began. With the unemployment rate barely budging and new jobless claims still topping 400,000 each week, the concern lingers that businesses are not investing in human capital. That in turn would mean that both corporate growth and consumer confidence will remain weak - poisonous serum for stocks.
Paul Ashworth, senior U.S. economist at Capital Economics Ltd., says there actually are encouraging signs appearing on the job front, if we look beyond the weekly claims for unemployment insurance.
Jobless claims numbers released last week showed a jump of 37,000, to a seasonally adjusted 464,000, representing the largest weekly increase since February and reinforcing a widely held belief that labour conditions have been worsening since the spring.
It's true that unemployment figures are considered a lagging indicator on the health of the economy, but at this stage of the recovery, investors want to see some spark of hope in the job market to be reassured we are not heading into another dip.
Mr. Ashworth zeros in on private sector payrolls as the most important indicator of health. Here, the numbers rose by more than 200,000 in March and April, before cooling to an increase of 13,000 in May and 83,000 in June. "The moderation in the growth rate of private temporary employment is not a good sign," he notes. But "the strength of the rebound in hours worked over the past year is encouraging for future employment gains."
It's not just that longer workweeks are priming the pump for more hires. Two reports show that layoffs have fallen back to pre-recession levels. The U.S. Department of Labor's Job Openings and Labor Turnover Survey (JOLTS) says layoffs declined by 21 per cent year over year in May, the latest data available. And the Challenger index, produced by the outplacement firm Challenger, Gray & Christmas Inc., says job cuts in each month of the first half of the year have been less than the corresponding months in 2009. In June, for example, there were 47 per cent fewer job cuts than a year earlier.
Mr. Ashworth and other economists find it hard to explain why jobless claims are still running consistently high when layoff data suggest they should be much lower. But the fact that some key indicators are pointing positive means that the high claims data may not be anything to worry about, he says.
"The bottom line is that labour market conditions didn't deteriorate sharply in June," Mr. Ashworth wrote in a new report. "We wouldn't be surprised to see private employment growth pick up again in the second half of the year."