Daily Forecast Update: Jobless Claims, Productivity

February 4, 2010

By Selma Lewis, Research Economist

Bad News: The number of people out of work and claiming unemployment benefits at the end of January was higher than expected. There were about 8,000 more people who lost their jobs in the last week of January. Tomorrow’s employment report may be more reveling about the state of employment across the country.
Mixed News: Productivity was up again in the fourth quarter of 2009 resulting from more output and more hours worked. This data is good for near-term corporate profits; however, it means a continuation of fewer new jobs. Current employees are working more hours and earning slightly more per hour. The bigger picture suggests that the sharp pace of layoffs has slowed drastically but that employers are still not hiring workers.

Jobless data for the last week of January were disappointing with initial claims rising 8,000 to 480,000, after also upwardly revised previous week’s numbers. Despite the average low at the beginning of January, the rest of the month has been poised with higher number of layoffs. The four-week moving average for initial claims, increased to 468,750, up 11,750. This is the highest level since the week ended December 5th.
After a steady decline in jobless claims since the 4th quarter of 2008, the average hit a low of 440,750 in early January. The numbers for the last week of January are still at the levels of the beginning of 2008 before the massive layoffs took effect.
Continuing claims also rose 2,000 to 4.6 million, however the four-week average is down by 51,000. Analysts believe this is not a signal of improvement, but it merely due to the exhaustion of eligibility of regular benefits, which occurs 26 weeks after beginning of the jobless claim. There is also a concern that very positive numbers seen at the beginning of January were a temporary stroke of luck.

According to today’s BLS productivity report, the fourth quarter productivity was again strong, at 6.2 percent annualized, following third quarter’s welcomed 7.2 percent gain. The latest number is higher than analysts were expecting. This number was led by 7.2 percent surge in output and 1.0 percent increase in hours worked. This was the first quarterly increase in hours worked since the second quarter of 2007. Productivity increased 5.1 percent over the last four quarters, also more than any other period after 6.1 percent increase from the first quarter of 2001 to the first quarter of 2002.
Unit labor costs in nonfarm businesses fell 4.4 percent, a result of the larger 6.2 percent increase in productivity than 1.5 percent increase in hourly compensation. Over the last year, unit labor costs fell 2.8 percent, while hourly compensation and productivity increased 2.2 percent and 5.1 percent, respectively. This decline in unit labor costs was the largest since unit labor costs fell 3.2 percent over the four quarters ending with the first quarter of 2002.

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