Thursday, the Labor Department reported that initial jobless claims fell 20,000 to 512,000 for the week ending Oct. 31, 2009.
It’s the first decline in two weeks, and the lowest number of initial claims since January, says Rex Nutting for MarketWatch. He reports that initial jobless claims have been above 500,000 for 51 weeks.
This data arrives a day before the monthly figure for October.
Bloomberg’s Sapna Maheshwari reports, “The government is projected to report that payrolls fell by 175,000 workers last month, according to the median of estimates in a Bloomberg News survey before tomorrow’s Labor Department report. The jobless rate probably climbed to 9.9 percent, the highest since 1983, according to the survey.”
All the same, the stock market has climbed on today’s jobless data. As of 2 p.m. EST, the Dow was up 1.69%, Nasdaq up 2.2%, and the S&P 500 was up 1.53%.
Mike Stanfield, chief investment officer at VSR Financial Services, said that this was reassuring to investors following several weeks of concerns about the pace of the recovery. It was also encouraging for investors ahead of Friday’s monthly employment report, noted CNNMoney.
But true economic recovery is never supported by one data point. Tomorrow’s monthly report will shed additional light on the pace of this recovery, but so will other economic news, like productivity.
According to the Labor Department, U.S. business productivity grew at its fastest rate in six years in the third quarter.
“The Labor Department said on Thursday that productivity surged at a 9.5 percent annual rate, the quickest pace since the third quarter of 2003,” writes Lucia Mutikani for Reuters.
Both this 9.5% uptick in productivity and the decline of initial jobless claims to a 10-month low are great statistics to help support this recovery. The question now will be if we can sustain these figures…
Does the U.S. economy have enough juice to keep productivity climbing at near double digits? Will jobless claims continue to fall?
These two key pieces of economic data have an interesting relationship in cost-cutting times like these. Businesses that want to cut costs more often than not skim their labor pool for savings. Look at Johnson & Johnson (JNJ:NYSE), who earlier this week announced job cuts of 8,200.
Companies are squeezing more productivity out of fewer employees. Right now, most businesses are keeping up with demand with the staff they already have.
The jump in consumer demand will force companies to hire more employees, lowering productivity, and possibly lowering profits – depending on just how much demand grows.
Which will win out? Reuters quotes Michelle Girard, a senior economist at RBS in Greenwich, Conn.:
We expect the pace of efficiency gains will soon begin to fade. Having cut payrolls so dramatically during the last downturn, we believe that companies will be forced to add workers earlier in this recovery than was the case following the last two recessions.
Retail stores have seen same-store sales climb 2.1%, the biggest rise since July 2008. With the holiday season coming on fast, investors may see sooner rather than later how businesses will handle demand.
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