New government data released Thursday suggest that the job market’s spring slump may be ending, although turmoil in Europe could stall the progress of the recovery.
The number of people who filed new claims for unemployment insurance fell slightly last week to 370,000, according to the Labor Department. The average for the past four weeks has moderated after a spike in April that brought the country alarmingly close to 400,000 new claims a week, a benchmark that signals deeper troubles in the economy.
The job market had been growing robustly over the winter but hit a wall this spring. Although some economists explained the drop-off as a mathematical quirk resulting from this year’s warmer weather, others worried that it was a more significant speed bump. Weekly jobless claims reached 392,000 in April before tapering off this month.
Paul Dales of Capital Economics called the spike a “red herring” driven by shifts in the holiday calendar, and he expects job growth to pick up this month.
“Claims are now more or less back in line with the trend seen in the first few months of the year,” he said.
Although weekly jobless claims are a notoriously volatile indicator, economists are hopeful that the smaller number of people signing up for unemployment benefits is a sign that more Americans are working. The most reliable and detailed overview of the health of the labor market will come next week when the government unveils the number of new jobs created in May and the monthly unemployment rate. Economists are predicting that 148,000 nonfarm jobs were created this month, up from just 115,000 in April. The unemployment rate is expected to remain unchanged at 8.1 percent.
That doesn’t mean the economy is back on its feet, however. The data are not expected to show a return to last year’s more robust pace of growth — only that the slump did not get worse.
“It sounds like there could be a bit of pickup, but it’s not going to shoot the lights out,” said Brian Bethune, an economics professor at Amherst College. “There has been some degree of a loss of momentum.”
Underscoring the fragility of the U.S. recovery are fears of a potential backslide in Europe. Britain said Thursday its economy shrank by 0.3 percent during the first quarter, more than initially estimated. This week, the Organization for Economic Cooperation and Development warned that the 17 countries in the euro zone also would suffer a 0.1 percent contraction this year before picking up in 2013.
There is one bright spot, however: Germany’s domestic product grew 0.5 percent during the first quarter. Although Germany is the largest economy in the euro zone, the country’s growth is not enough to turn the region around.
“It would be hard for Germany to carry all of Europe on its back,” Bethune said.