Unemployment Claims Data Adds More Uncertainty

Data, data everywhere,

But what of it to think?

Data, data everywhere,

It makes the markets shrink.


My apologies to Samuel Taylor Coleridge, but the unemployment claims numbers out today and Wall Street’s reaction made me think of that great sea tale that starts out promisingly, then takes a turn into the terrifying.

Initial claims for unemployment took a small, but unexpected jump last week. After trending more or less down for several weeks, claims have been going back up. Last week, unemployment claims rose by 2,000 to 484,000. Economists had been expecting a decline.

An increase of 2,000 might not seem like much, but it’s now higher than at any time this year since February. For the week ending July 24, the U.S. Department of Labor reported 460,000 jobless claims were filed. By itself, those increases wouldn’t set off the kind of alarms that caused the Dow to plummet 100 points at the opening today. But with yesterday’s plunge on discouraging news from the Federal Reserve and this morning’s unexpected negative financial report from Cisco Systems, traders were especially sensitive to the news.

If you watch the markets at all, you may remember that big rally in the late spring. It abruptly ended in May, when the Dow reversed itself hitting a low of 9868 last month.

It doesn’t take an MBA to see the connection here to hiring. Revenue changes are particularly important to economists and forecasters, but CEOs live and die on earnings. Revenue growth is important to them, too, because, as any CFO knows, you can’t save your way to prosperity. However, there are only so many ways to keep earnings positive with flat revenue and the easiest is not to hire people.

Uncertainty, even with revenue growth, is also a powerful disincentive to add staff. And that’s just what we’ve been seeing for the last two quarters. Corporate financials are improving year-over-year — not a time to party exactly, considering how poor last year was — however, everywhere there are questions about the sustainability of this improvement.

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Terms like double-dip recession, a “W” recovery, are part of water cooler, lunch-time conversations.

No wonder there’s uncertainty. There’s data everywhere that can support almost any view. Consumer confidence on the rise for most of the year, headed down these last two months. Help-wanted ads are increasing, and SHRM is saying hiring will be up in August. But the U.S. Bureau of Labor Statistics reports show job growth is anemic. Private sector hiring has been barely perceptible.

Zoom back for a moment to a high-altitude view and the numbers and the data point the same way: 2010 is an improvement over 2009. Admittedly, it’s a bit like the view an earthworm has: everything looks up from its perspective.

Nevertheless, since the beginning of 2010, more than 650,000 jobs have been added and the economic trends, as reported by no less than The Conference Board, are improving. SHRM’s LINE report for August says “Job growth will make small strides in August and layoff rates will approach three-year lows.”

Although the possibility of a double-dip can’t be discounted, the trend is decidedly up — slow, for sure, but steady. At some point, those 40 percent of workers who say they’re ready to change jobs, will become active. There’s plenty of pent-up worker frustration; just look at how the Internet is making a folk hero out of the JetBlue flight attendant.

So while today’s unemployment report is disappointing, keep watching the broader trends. Already recruiters are telling SHRM researchers that hiring top talent is getting harder. It makes sense and cents to refill pipelines, assess the most likely future needs, and identify candidates.

To end this post the way it began, recall that the  Rime of the Ancient Mariner concludes with a statement of its intended lesson.

He recruits the best, who prepares the best
For recoveries great and small;
Top talent is there, bidding its time
For that right opportunity to call.

John Zappe is the editor of TLNT.com and a contributing editor of ERE.net. John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.

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3 Comments on “Unemployment Claims Data Adds More Uncertainty

  1. Nice summary. I’m a fan of the SHRM LINE as having more weight. Slooow growth predicted by LINE can be almost as painful though since firms will constantly delay adding resources to support the growth. That is why (IMHO) so few recruiters are being added to firms recovering from the recession and why the remaining recruiters, now slooowly adding to their plates month by month, are simply burning out.

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