Initial unemployment claims rose to 362,000 for the week ending March 3, an increase of 8,000 from the previous week’s claims, demonstrating that the unqualified optimism surrounding the labor market in recent weeks was premature.
The 4-week moving average, generally considered more reliable than week-on-week figures, increased by 250 from the week prior to 355,000, a change that’s hardly significant. And yet, economists are patently less positive in their outlook towards jobs than they were a month earlier.
“There are a variety of factors that lead us to think that the recent improvement is not all it’s cracked up to be,” said Dov Zigler, an economist at Scotiabank Group in Toronto Canada. He noted that during the initial winter months figures are seasonally adjusted to account for an expected decline in employment, which didn’t happen. This built-in assumption could distort the data and by extension others’ view of the labor market. Zigler said he will wait to compare the numbers for March and April with those of January and February, before putting faith in positive job growth trends.
Kim Fraser, a junior economist at BBVA Compass, harbored similar misgivings. “We’re still cautious about the unemployment situation however we do see gradual improvement and we do think that employment growth is going to be stronger in 2012 compared to 2011,” she said.
While the unemployment rate has dropped to 8.3 percent, the participation rate—the number of people who are working or looking for work—also dropped simultaneously from 64.1 to 63.7. Falling participation rates could reflect the number of employees transitioning from full to part time work, employees who have just completed part-time jobs, or discouraged employees who have given up on claiming assistance, said Fraser.
One other element that could have influenced job growth indicators in the last two months is the unseasonably warm weather. As a result of warm weather, construction workers were able to find work in January. However, construction wasn’t the only sector hiring. The employment diffusion index, calculated by the Bureau of Labor and Statistics, shows broad diversification across industries, said Russel Price, senior economist at Ameriprise Financial.
At least one economist views the claims report as good news. Concerning the 8,000 new jobless claims, Price said, “It’s probably within the Labor Department’s margin of error.” He called a shift of only 8,000, “miniscule.” As regards the slow pace of growth, “you have to go from bad to less bad, to not so great to a little bit better to good,” he said.