By Michael Englund and Rick MacDonald The health of the U.S. labor market has been a dominant issue in Campaign 2004. And on Oct. 28, with the closely fought contest entering its final hours, politicians, economists, and investors were given one last piece of employment-related data to chew on before Election Day: the
initial jobless claims data for the week ended Oct. 23.
On the surface, the report didn't look favorable for the Bush camp. The number of Americans filing for unemployment benefits for the first time jumped 20,000, to 350,000 -- well above economists' median forecast of 335,000. The increase suggests that the 330,000 figure for the week ending Oct. 16 was indeed an inflated downside number following the elevated levels in recent weeks, possibly exacerbated by the Columbus Day holiday.
WINDBLOWN SWINGS. But Action Economics believes the underlying trend in employment remains solid. In spite of recent volatility in the numbers, it's still our view that the current underlying trend in initial claims is around 325,000 to 350,000 -- consistent with monthly growth in nonfarm payrolls of 150,000 to 200,000. We expect a gain at the high end of this range for October as last month's hurricane effects are unwound.
Even without the aid of hurricanes to drive the swings, the initial claims figures extended their zig-zag pattern through the third week of October -- with a surge from a surprisingly lean 330,000 level in the previous week. The most recent report marks the high end of the general 325,000-to-350,000 sideways trend for the data, evident since the end of 2003.
Claims were at the high end of the range for the period as hurricanes disrupted the Florida economy, and now claims may hover at the low end of the range as the state bounces back. We at Action Economics expect claims to move back toward 340,000 for the Oct. 30 weekly report.
The bump up for the latest report might have sparked some fresh handicapping of the employment report scheduled for release on Nov. 6. But few in the market -- or anywhere else, for that matter, are looking past the election for now. Englund is chief economist and MacDonald is global director of investment research and analysis for Action Economics