I’ll admit: I started getting a little concerned after jobless claims jumped to the highest level for 2012 a few weeks ago. They didn’t quite break through the 400,000 benchmark that indicates a slowing jobs market, but they got close. The fact is that after months on the decline, jobless claims came back in a big way over the past few weeks, and I have put this economic indicator at the top of my radar.
Thankfully, it looks like we’ve reached the end of this bearish trend. Today, the Labor Department announced that jobless claims dropped 14,000 to 374,000—far below the consensus estimate of 385,000. This is the lowest level in six weeks, bringing the four-week moving average down to 385,750. Now, the reason that jobless claims are important is that they indicate the pace of layoffs.
In addition to the 400,000 benchmark, there’s another important benchmark: 375,000. When jobless claims dip below this level, it means that the increased hiring could very well reduce the unemployment rate. So, this week’s 374,000 reading gave us a little reason to cheer.
Today we also received good news on the jobs front from payroll processor ADP; second to the Unemployment Rate report the ADP payroll report is one of the leading barometers for the state of the jobs market. And that’s because the ADP covers nearly one in six workers.
In June, ADP found that 176,000 private-sector jobs were added, significantly higher than the 110,000 consensus estimate. This also represents an uptick from May, when just 136,000 jobs were added. This makes me hopeful that American businesses will in fact create more than the 95,000 jobs expected for tomorrow’s June report.
So while tomorrow will be the moment of truth for the state of the jobs market, we should all be encouraged by the secondary reports released today. I’ll have the full details on the new unemployment rate as soon as the numbers are released, so be sure to keep your eyes peeled for my next blog post.