Employment Thursday

It was likely to happen sooner or later, Initial claims rose for two weeks running. Last week they rose from 454k to 473k, and this week they came in at 480k. There is an indicator that this is not cause for alarm though: The 4-week moving average (often used with this number to smooth out the fluctuations) decreased this week from 473k to 468k. This decrease is due to a much higher initial claims number 5 weeks ago. Long story short, this isn't good news, but it isn't bad enough to fret over.

I posted the Krugman article a few days back and actually got some reaction over it. Krugman's estimates that we need 300k job creation a month may seem unreachable, but you should consider the mechanics of the job market. Just as high unemployment leads to lower wages, job creation leads to more job creation. Basically, more people with jobs = more people spending money = more demand for products/services = more demand for labor to fulfill that demand for products. Because of this cyclical behavior, the job market actually follows more of an exponential growth pattern, see depiction below.



What this means is that its ok for us to see modest job growth in the short run, so long as it's growth.