Jobless Claims Still High

Initial jobless claims decreased 13,000 to 623,000 (consensus was for a reading of 628,000) in the week ended May 22 but held above the four-month low of 605,000 set three weeks earlier. The peak for the cycle was 674,000 in the week ended March 27.

The current reading is in territory that suggests that while job losses are ebbing, they remain high, as a reading of 623,000 is consistent with job losses of over 500,000 a month. Early expectations for next Friday's jobs report are for a loss of about 550,000 jobs. Job losses like that could lead to increases of two- or three-tenths per month in the unemployment rate. Underscoring the idea of ebbing but still-high job losses was the April employment tally, which fell 539,000, about 140,000 below the average of the previous five months.

Glaring evidence of the difficulties that workers are having in finding new employment is the level of continuing claims, which are reported with a one-week lag. Continuing claims increased to a new record high of 6.788 million, up 110,000 for the week and 495,000 for the month.

Changes in population growth make it difficult to equate today's claims figure with those of yesteryear. To compare apples to apples it is best to look at the unemployment rate for insured workers. In the week ended May 15, the rate was 5.1%, up from 5.0% the previous week and 4.7% a month earlier. The current level is the highest since December 1982. The all-time high was 5.4% in October 1982, which was a month before the 10.8% peak for unemployment for all workers (not just for workers covered by unemployment insurance). The continuing increase points to a further rise in the U.S. unemployment rate, which was at 8.9% in April.

Investors are likely to increasingly ignore employment data the more that there are signs of a trough in the economy. Such has been the case in recent months. Decreases in claims are more likely to garner a rally in riskier assets than increases would. Fatigue will nonetheless set in on rallies that are based solely on the "green shoots" idea. Eventually, what will be needed for risk assets to gain further will be signs that a recovery is taking hold and moving toward a self-reinforcing condition.

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Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market, first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.

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