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Jobless Claims See Dramatic Drop

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April 22, 2005 -- After the sharpest single-week drop in jobless claims in almost three years, economists warn that the perceived indicator of a strong job market could be a hiccup -- but for small businesses, other data showed growth might be on the horizon.

The latest week's jobless claims, released by the Department of Labor, showed filings for unemployment, at 296,000 -- far better than the mark of 329,000 industry experts predicted. The week ended April 16.

But experts warned the results may have been skewed by the early Easter holiday and may have overstated the market's improvement. Experts also pointed to largest core inflation increase, .04%, in the last 2 1/2 years coupled with the .06% increase in consumer prices last week as forecasts for gloom.

However, data from the Federal Reserve and the National Federation of Independent Businesses weave an optimistic tapestry for small businesses.

"Since the Department of Labor has such a narrow laser-focus on the numbers in front of them, it's hard to get a small business sense out of them," Brian Headd, and economist in the Office of Advocacy at the Small Business Administration, said. "But there are other sources to look at and they look pretty good."

For instance, the Senior Loan Officer Survey, released by the Federal Reserve, gave optimistic insight into the lending world. The study showed a steady decline in the tightening of lending standards combined with a trend of the nation's largest lenders feeling stronger demand for loans - both great indicators of future small business growth.

"Small business owners don't borrow money, then go out and hire the next day," Headd added. "But they're borrowing for a reason."

The NFIB's monthly Small Business Economic Trends Report echoed these sentiments, revealing that 45% of the 409 small businesses surveyed reported spending on new capital. However, the Small Business Optimism Index fell 1.2 points to 102.4 -- but still remains above the index's average of 100.

Also, given that the index hit a record high of 107.7 in November and given the fact that the March number is almost identical to a year ago, a slight decline was to be expected.

ther seasonal aspects may have also had a detrimental affect on the study. A looming tax deadline and the smallest respondent pool in the study's five-year history may have also played factors in less than desirable results. However, experts remain cautiously optimistic regarding the results of the quarterly survey, done at the end of April, before any warning flags are flown.

Last updated: Apr 22, 2005




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