Jobless Claims Could Prove Barometer of New Downturn

On Thursday, many in business media sounded just like we did last week. You’ll recall that in our article covering the weekly jobless claims report, we said the small increase in claims could be the start of a new trend of increasing layoffs. We have been talking about the “frozen consumer and purchasing manager” of late, and the panicked investor to boot. It remains our view that the third quarter may very likely sink into recession as a result. Finally, we said to keep an eye on the weekly claims count as a potential barometer of such catastrophe. Well, weekly claims unfortunately offered another increase Thursday, and caught the attention of a good many more Wall Street pundits as a result. So what are we saying this week then?

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Jobless Claims Could Prove Barometer of New Downturn

Jobless claims rose by 5,000 in the week ending August 20, edging up to 417K. The prior week was also revised higher to 412K, from the initially reported 408K. There was a special factor at play over the last two weeks, as the Verizon (NYSE: VZ) work stoppage drove the filing of at least 12,500 claims in the August 13 ending period and 8,500 in the week ending August 20. Still, this effect should have driven a trend of decline for this latest week, over the week just prior, and it did not. Perhaps the four-week moving average of weekly jobless claims would be fattened by the stoppage. The average increased by 4,000 this week, to 407,500. It’s my view that the average should be affected over the coming weeks by the deterioration trend forecast here for the economy.

The insured unemployment rate actually improved by a tenth of a percentage point, to 2.9%, in the August 13 period. The number of insured unemployed fell by 80K to 3.641 million. The total number of unemployed people receiving benefits under a program of some sort, including the extension program, fell by 45,989 in the August 6 ending period, to 7,290,189. As we posited in last week’s review, we suspect a good many of these Americans disappearing from benefits programs did not find new employment, but rather lost benefits due perhaps to a tightening set of rules and regulations for the receipt of those benefits. Governments are tightening the noose in order to expose fraud, but they are in fact squeezing the poor. It’s quite a shame, considering that temporary tax cuts for the rich remain in place well after their intended duration.

Even though this regular labor data point is usually a lagging indicator, I think this time would be different. This is because corporate managers are not asked to change mindset from economic boom to bust as in normal cycles. Rather, we’ve continued to languish in a slow growth and uncertain environment, and are now potentially looking toward renewed downturn. Executives and managers would be quicker to cut costs as a result. That’s this analyst’s view anyway.

Article should interest investors in Paychex (Nasdaq: PAYX), Manpower (NYSE: MAN), Robert Half International (NYSE: RHI), 51Job Inc. (Nasdaq: JOBS), Monster World Wide (NYSE: MWW), Korn/Ferry International (NYSE: KFY), Administaff (NYSE: ASF), Kforce (Nasdaq: KFRC), TrueBlue (NYSE: TBI), Dice Holdings (NYSE: DHX), Kelly Services (Nasdaq: KELYA), SFN Group (NYSE: SFN), CDI Corp. (NYSE: CDI), Cross Country Healthcare (Nasdaq: CCRN), On Assignment (Nasdaq: ASGN), AMN Healthcare Services (NYSE: AHS), Barrett Business Services (Nasdaq: BBSI), Hudson Highland Group (Nasdaq: HHGP), StarTek (NYSE: SRT), RCM Technologies (Nasdaq: RCMT), VirtualScopics (Nasdaq: VSCP), American Surgical (OTC: ASRG.OB), Medical Connections (OTC: MCTH.OB), iGen Networks (OTC: IGEN.OB), St. Joseph (OTC: STJO.OB), General Employment Enterprises (NYSE: JOB), Total Neutraceutical (OTC: TNUS.OB), TeamStaff (Nasdaq: TSTF), Stratum (OTC: STTH.OB), Purespectrum (OTC: PSRU.OB), Corporate Resource Services (OTC: CRRS.OB), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), TD Bank (NYSE: TD), PNC Bank (NYSE: PNC), General Electric (NYSE: GE), Wal-Mart (NYSE: WMT), McDonald's (NYSE: MCD), Alcoa (NYSE: AA), American Express (NYSE: AXP), Boeing (NYSE: BA), Caterpillar (NYSE: CAT), Cisco Systems (Nasdaq: CSCO), Chevron (NYSE: CVX), DuPont (NYSE: DD), Walt Disney (NYSE: DIS), Home Depot (NYSE: HD), Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM), Intel (Nasdaq: INTC), Johnson & Johnson (NYSE: JNJ), Kraft (NYSE: KFT), Coca-Cola (NYSE: KO), 3M (NYSE: MMM), Merck (NYSE: MRK), Microsoft (Nasdaq: MSFT), Pfizer (NYSE: PFE), Procter & Gamble (NYSE: PG), AT&T (NYSE: T), Travelers (NYSE: TRV), United Technologies (NYSE: UTX), Verizon (NYSE: VZ), Exxon Mobil (NYSE: XOM).

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