I was on an airplane about to take off from New York to Los Angeles when I heard about the jump in jobless claims that took place last week. The number reached its second-highest level this year and was well above the one-year average. I have been harping on the claims figures recently and have to put my two cents in on this one, because I see it as extremely important.
I mentioned earlier in my review of Bernanke's Thursday-evening speech that the Fed chairman put emphasis on jobs data, showing his nervousness about the employment situation. He even elevated the importance of data scheduled to be released in the coming days, which include another set of jobless claims. The Fed surely recognizes that the jobless claims trend bears watching.
Jobless claims have been above the one-year average, now at 320,000, for the past seven weeks, the first such occurrence since 2003 when job growth averaged just 9,000 per month. This is a worrisome trend. The rise in continuing claims validated this concern in a big way. Continuing claims measure the number of people continuing to receive jobless benefits, a figure that rises when initial filers have difficulty obtaining a job. In the latest reading, which was from two weeks ago (the data are released with a one-week lag), continuing claims increased 112,000 to 2.665 million, he highest level since December 2005.
As I have been saying recently, the combination of falling consumer confidence and rising jobless claims is a terrible one for the economy. The expansion will end if this continues. Next week therefore holds great risk with respect to jobs and economic expansion. As industrial production has plunged in October, and employment may be contracting, the economy is on the cusp of recession.
P.S. Will you be there when Cramer makes his next move?
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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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