Some really good news this morning, but a note to hold your horses on the celebration of at least one aspect of that news.
Initial jobless claims, which I’ve called the single most positive data point in the entire economy, posted nearly a 50-year low at 210,000. On a population- or labor force-adjusted basis, it is an all time low.
This, by the way, bodes well for a another decrease in the unemployment rate in the next several months, possibly as early as in next week’s jobs report, as initial jobless claims lead the unemployment rate typically with a short 1-3 month lag.
Bottom line: people may not have great jobs, but the jobs they have are more secure now than they have been at any point since the 1960s. That’s great news.
There was good news in personal income and outlays as well, with a strong +0.5% increase in income, and a pop in the savings rate from 2.5% to 3.2%.
BUT … the big positive news looks like a one-time jump based on the payment of bonuses, and also the decline in tax withholding in January due to the tax law changes passed by Congress.
Here’s the important note from the Commerce Department:
So we had a big $30 pop in savings due to the payment of annual bonuses, that is of a piece with the big +0.8% pop in supervisory wages we saw in January’s employment report. There is good reason to believe that little if any of this found its way down to the plebes, also based on January’s employment report.
Also noteworthy is that monthly tax withholding, based on the Commerce Department’s $115 Billion annual estimate, boils down to just shy of $10 Billion per month, or about 5% of current withholding. That will continue, so the YoY comparisons will continue to be good, but this is a one-time pop on a m/m basis. Keep in mind that other provisions of the tax changes, especially real estate and state tax provisions, may offset most of this improvement, but won’t be shown in the personal income and outlays reports.
So while line workers’ jobs may be very safe, there may actually not be significant net improvement in their take-home pay. Great overall news, but unless you get bonuses as a manager, you may withhold popping the cork on the champagne.