By Don Lee, Tribune Washington Bureau –
WASHINGTON — Fresh evidence indicates that the labor market is continuing to heal and that there’s stronger economic growth supporting new hiring than the most obvious numbers might suggest.
The Labor Department said Thursday that new claims for unemployment benefits dipped last week to 359,000 — the lowest level since April 2008. Jobless claims have been moving steadily lower in recent weeks amid other signs that the job market is gaining strength.
Separately, the Commerce Department said Thursday that its latest tally of the nation’s gross domestic product, the total value of goods and services produced, showed a solid 3 percent annualized increase in the fourth quarter last year.
That’s unchanged from its previous estimate, but the new report showed gross domestic income — another broad but less commonly cited measure of economic activity — jumped at a much higher annualized rate of 4.4 percent in that quarter.
Theoretically, the two measures should be the same; GDP looks at the spending side, and GDI the income end. And historically, the two numbers track closely. But GDI’s much-bigger gain indicates that “recent GDP readings are too low and will be revised upward,” said Ryan Sweet, an analyst at Moody’s Analytics.
The difference is more than academic, as it may help explain the disconnect between the relatively modest economic growth recently and the sharp decline in the jobless rate to 8.3 percent in the first two months this year from 9.1 percent in August.
In fact, Federal Reserve Chairman Ben S. Bernanke said this week that “the better jobs numbers seem somewhat out of sync with the overall pace of economic expansion.”
That’s one reason the Fed chief remains cautious about the economy despite the recent positive signs.
The GDP-GDI discrepancy corresponds to a gap in another pair of important economic data measuring the job market.
According to the Labor Department’s previously reported monthly jobs reports, the economy added an average 244,000 jobs a month from December through February. That figure is based on a survey of employers. But for those same three months, the agency’s survey of households showed employment gains of about 480,000 a month on average.
It’s the household data that determines the change in the jobless rate. But most experts consider the employers’ survey more reliable, and those numbers are widely cited in reports, just as GDP figures are used rather than GDI. But the household survey includes the self-employed and better tracks hiring at newer and smaller firms.
All of which raises the question: “Will the real economy please stand up?” asks Lynn Reaser, chief economist at Point Loma Nazarene University in San Diego.
“The truth is probably somewhere in between,” she said, adding that over time, the GDP and GDI numbers should converge, as will the employment numbers derived from the survey of employers and the one of households.
Usually, there has been a close connection between changes in GDP and the unemployment rate, but not recently.
In the second half of last year, GDP expanded at an annual rate of 2.4 percent, a pace probably not strong enough to bring down the jobless rate. But the GDI growth rate for that same period came in at a much stronger 3.5 percent.
Bernanke, delivering the last of four lectures at George Washington University on Thursday, said he expected the economy to return to a normal growth rate of about 3 percent a year, though he didn’t specify when that might happen.