Despite a jump in
initial jobless claims in the last week of December, economists expect Friday's
employment report will show that the worst is over for the labor market.
The number of Americans filing for first-time unemployment benefits rose by 36,000, to 447,000 in the week ended Saturday. It was the highest level since the beginning of December and an increase from the previous week's revised 411,000.
But the news proved a nonevent on Wall Street, with the
Dow Jones Industrial Average ending up 98.74 points to 10,172.14 and the
Nasdaq Composite closing ahead 65.02 points to 2044.27.
Economists weren't overly concerned about the steep rise in claims. "It is not a sign that the labor market is faltering again," said Joel Naroff, president of Naroff Economic Advisors.
Instead, Naroff attributed the surge in claims to seasonal factors, including the return of more normal temperatures to many areas of the country. Individual state reports showed that a lot of construction workers were among those laid off. Many of them had presumably been kept on payrolls because of unusually warm weather.
Also cushioning the blow of the report is the volatility of weekly data at holiday time. A more reliable gauge is the four-week claims average, which fell to 409,750 from 418,000 in the previous week.
When it comes to the December employment report, slated for release at 8:30 a.m. EST, economists are forecasting payroll losses of 139,000, following a steep drop of 331,000 in November. At the same time, they're predicting the unemployment rate will rise to 5.8% from 5.7% in November.
"The market is expecting a better report than we've had in the past few months," said Josh Feinman, an economist at Deutsche Asset Management, "one that will reinforce the view that the worst is over." Even though the unemployment rate is expected to have gone up in December, it is considered a lagging indicator. In 1991, the jobless rate continued to rise a full year after the recession ended.
As for Wall Street's reaction to Friday's numbers, economists say investors are biased toward forgiveness. "A good number will be taken as a clear indication the economy is turning," said Naroff. "A bad number will not be as worrisome as it was in October or November."
A couple of recent reports suggest the economy could be turning a corner. On Wednesday, the Institute for Supply Management reported the best reading in its manufacturing index in more than a year. Also, recent upticks in consumer sentiment suggest that area of the economy remains strong.
A privately compiled report showed that the number of job cuts declined for the third month in a row in December. Still, Chicago outplacement firm Challenger Gray & Christmas said the total number of layoffs announced in 2001 -- nearly 2 million -- was the most since the firm began its survey in 1993.
"Just 18 months ago, job fairs would practically have to drag people in off the streets," said chief executive John Challenger, in a written statement. "Now, hiring calls result in lines of unemployed workers wrapped around the block, all vying for a smaller number of jobs, even at modest wages."
Several companies set plans for workforce reductions in December, with tech firms
Still, according to Challenger Gray & Christmas, December job cuts were lower by 11% from November, when they totaled 181,412. Reductions in November were 25% below October's 242,192, which was 2% less than September's 248,332.