Things aren’t looking good for the labor market or for the economy in general, at least if you read deep into two reports from the federal government this week.
Jobless claims are not pointing to any improvement in the labor market with initial claims up 14,000 in the week of Feb. 22 to a 348,000 level, according to the Labor Department.
The four-week average, considered a better indicator than the week-to-week change, is unchanged at 338,250. This number is slightly higher than the month-ago trend in a reading that points to no improvement for the monthly employment report.
Continuing claims tell mostly the same story, up 8,000 in data for the Feb. 15 week to 2.96 million.
Taking a step back and looking at the bigger picture, the non-partisan Congressional Budget Office said this week that it anticipates increases in housing construction and investment by businesses will boost overall output, employment, and incomes – but it will not be enough to drive any more than meager growth over the next several years.
The CBO estimates that the economy will continue to have considerable unused labor and capital resources — or “slack”— for the next few years. According to the agency’s projections, the unemployment rate will decline gradually but remain above 6% until late 2016.
“Federal fiscal policy will restrain the growth of the economy by much less than it has recently. As measured by the change from the fourth quarter of the previous year, real GDP is projected to increase by 3.1% this year, by 3.4% per year in 2015 and 2016, and by 2.7% in 2017,” the report states. “By comparison, real GDP increased by 2.7% in 2013.
By the second half of 2017, CBO projects, real GDP will return to its average historical relationship with potential (or maximum sustainable) GDP — that is, slightly below its potential level.