Initial Unemployment Claims Reaches Another Low; Yellen Talks Unemployment

Last week's unemployment claims rate was at a post-recession low. Fed Chair Janet Yellen noted that the jobs market isn’t quite as strong as the U.S. unemployment headline number suggests, which won't trigger higher interest rates all by itself.

For the week ending April 12, initial unemployment claims came in at an annualized 304,000, an uptick of 2,000 from the previous week’s revised level, according to the U.S. Department of Labor on Thursday. Last week the weekly claims rate was at a post-recession low.

The four-week moving average ending on April 12 decreased 4,750 from the previous week’s average to come in at an annualized 312,000. The four-week average moves more slowly than the weekly average, but it has finally also arrived at a post-recession low. That last time the four-week average was any lower was on Oct. 6, 2007, when it was 302,000.

In a separate employment-related bit of news, the Congressional Budget Office reported on Thursday that gradually increasing the federal minimum wage to $10.10 an hour would cost businesses – in the aggregate — $15 billion more in labor costs by the time the proposal took effect in 2017. That’s a sizable number, though when compared with total annual private U.S. payrolls, which totaled $5.4 trillion in 2012, the raised minimum wage would amount to an increase of 0.3 cents per every dollar spent on private payrolls.

The plan to raise the minimum wage in three steeps has been proposed by the Democratic-control Senate. It’s expected to go nowhere in the Republican-controlled House.

Yellen Talks About Unemployment

In “Monetary Policy and the Economic Recovery,” a speech that Fed Chair Janet Yellen gave at the Economic Club of New York this week, Yellen noted that the jobs market isn’t quite as strong as the U.S. unemployment headline number suggests – and indirectly explained why the headline metric isn’t going to trigger higher interest rates all by itself. “Other data suggest that there may be more slack in labor markets than indicated by the unemployment rate,” she said. “For example, the share of the workforce that is working part time but would prefer to work full time remains quite high by historical standards.”

Similarly, while the share of workers who are unemployed and have been looking for work for more than six months has fallen from its peak in 2010, it remains as high as any time prior to the Great Recession. Also, the low level of labor force participation may also signal additional slack that isn’t hinted at in the headline rate. “Participation would be expected to fall because of the aging of the population, but the decline steepened in the recovery,” the central banker noted.

Finally, she explained, a tightening labor market is also marked by upward wage pressures. Productivity might be up lately among American workers, but they aren’t taking home very much benefit from that trend; their bosses are. “At present, wage gains continue to proceed at a historically slow pace in this recovery, with few signs of a broad-based acceleration,” Yellen said.

Wall Street ended Thursday mixed. The Dow Jones Industrial Average lost 16.31 points, or 0.1 percent. On the other hand, the S&P 500 was up 0.14 percent and the Nasdaq gained 0.23 percent.