Market Adjusts to Weakening Labor Picture

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Jobless claims increased 15,000 to 444,000 in the week ended Aug. 30. That follows three weeks of decreases from the peak of 457,000 set four weeks ago, when claims reached their highest since March 2002.

Continuing claims increased 6,000 to 4.435 million. That is the highest level since March 1993. Although some of the recent increase in claims reflects technical factors, the increase almost certainly reflects deterioration in the labor market.

This deterioration will likely be evident in upcoming employment news. Today's jump in claims will weaken the resolve of those who have said the recent jump in claims was largely the result of technical factors.

The technical factor I note is the recently authorized extended benefits program. It is possible, according to the Department of Labor, that many people only recently realized that they were eligible for both extended unemployment benefits, which was approved by the Congress, and regular jobless benefits (because these workers regained eligibility after returning to work).

These filers are now showing up in the initial claims figures. There may also be bad accounting for the extended unemployment benefits, with some states reporting the extended filers incorrectly.

There is debate about the extent and impact of these factors, and the Department of Labor has not quantified the impact except to say that today's data reflect waning influence from the extended benefits program.

Some observers put the impact as high as 70,000, although it is probably a stretch to think that all of the recent increase in jobless claims is because of a technical glitch, especially since claims were trending up before the recent increase.