Despite an expected rise in weekly U.S. initial jobless claims, some economists are encouraged by a continued drop in the four-week average of claims, which they say could suggest the end of the recession. Others say seasonal factors are continuing to distort the data.

Initial claims rose to 640k following an upward revision of 3k to the previous week's claims of 610k. Initial claims were forecast to come in at 640k. The four-week moving average for initial claims eased to 646,750 from 651,000 in the week prior.

Abiel Reinhart of JPMorgan Chase Bank said U.S. jobless claims will send an important signal about the recession in the coming weeks, noting that while the fall in the four-week moving average has so far been relatively small, it is "quite unusual" for it to fall as much as it has during a recession.

"Because claims have always been a good indicator of the end of a recession, further declines in the four-week [average] of claims would show that our forecast for a resumption of economic growth in 3Q09 is reasonable," he wrote, though cautioned that the drop in the average could partially be attributable to the Good Friday holiday.

Ian Shepherdson of High Frequency Economics said he was surprised claims rose just 27k following the Easter holiday-related drop in the previous week.

"The failure to rise that high suggests either that the trend in claims is peaking or that the data are still affected by seasonal problems related to the holiday," he wrote. "We are inclined to take the latter view; with the ISM still in the 30s, jobless claims should be rising rapidly."

Ian Pollick, an economist at TD Securities, said he agrees that there are lingering effects from the Easter holiday.

"If we don't get any significant revisions next week, then we will have to give credit where credit is due and start shining our optimistic light on the four-week moving average, assuming it continues to fall," he said. "This is another weak report, and provides further evidence that the U.S. labor market continues to feel the punch from the slowing economic environment."

Meanwhile, continuing claims rose to a new high of 6.137 million in the reference week April 11, a larger number than the consensus forecast for a rise to 6.120 million. The previous week's level of 6.022 million, the former all-time high, was revised up to 6.044 million.

The four-week moving average for continuing claims rose to 5.944 million, up from 5.801 million in the previous week.

Economists from RDQ said that while claims appear to be levelling off, they remain at high levels, and are consistent with total job losses of 650,000 in April.

"Unfortunately, the rate of job losses still point to the unemployment rate rising by 0.1%...per week and we expect that the April unemployment rate will rise to 8.9% from 8.5% in March," they said.

The Bureau of Labor Statistics will release its official nonfarm payrolls report for April on May 8.

By Stephen Huebl and edited by Sarah Sussman
©CEP News Ltd. 2009