The number of people filing new claims for unemployment rose last week, the Department of Labor said today. But despite the surprising rise, economists said the job market is likely to continue to improve in the coming months.
Last week, 460,000 people filed initial claims for unemployment — up 18,000 from the previous week. The weekly numbers tend to be very volatile, so economists often look at the average of the most recent four weeks instead. That figure now stands at 450,250, a increase of 2,250 from the previous week.
But unemployment claims "only tell you about half of the payroll story," Ian Shepherdson, an economist at High Frequency Economics, told me this morning. "They just measure growth firings, they don't measure growth in hirings."
Companies have been adding more jobs in recent months, and payrolls grew by 162,000 in March. Many of those positions are temporary, but an uptick in temp hiring by private companies is often a sign that more permanent jobs are coming soon. (Some of the March jobs were also government temp jobs linked to the census; those don't have much of an effect on the long-term picture.)
Shepherdson said he expects the economy to add jobs in the coming months. And a survey of CEOs published Wednesday by the Business Roundtable found that 29% plan to increase their workforce in the next six months, compared with 21% planning cuts. That's a reversal from late last year, when 31% of CEOs said they were planning to cut their workforce, compared to 19% planning to increase the number of workers.
Even if hiring picks up, the unemployment rate may remain stuck near 10%. That's because improving economic conditions may lead more people to look for work, and the unemployment rate is based on how many people are looking for a job but can't find one. Still, when the rate of hiring is high enough (and the rate of firing is low enough), the unemployment rate can fall even when more people start to look for work.
In a speech yesterday, Ben Bernanke said that hiring remains "very weak," but he added that continued economic growth should "slowly reduce the unemployment rate over the coming year."