Initial jobless claims have fallen to a five-year low, suggesting that the worst slump since the Great Depression is finally receding.
Claims usually are among the most reliable indicators. But the signal appears premature, distorted by ObamaCare's approach, shifting demographics and the long labor market dysfunction.
After hovering near a ho-hum 370,000 for most of 2012, the four-week average of claims has fallen abruptly to 336,750, the lowest since the end of 2007. At first blush, that seems to correlate with robust job gains of close to 200,000 per month in the first four months of the year.
Yet a closer look at the April employment report raises a big question: Why are jobs growing so much faster than the number of hours workers are clocking
In April, aggregate hours worked fell 0.4%, the sharpest such decline since the start of the jobs recovery. One shouldn't make too much of a single month's data point, but over the first four months of the year, private payrolls grew 75% faster than total hours worked.
If job growth had only kept pace with total hours over the past four months, then the U.S. would have added a modest 463,000 private nonfarm jobs vs. the reported 813,000.
Some analysts believe that employers are cutting worker hours, even as some expand payrolls, to avoid the cost of ObamaCare's employer mandates.
Large employers face a choice: Pay more to meet the law's comprehensive coverage mandate or pay a fine of up to $3,000 per full-time worker who gets subsidized ObamaCare coverage.
"Cost-conscious companies have discovered different legal avenues to avoid paying health costs," wrote Steven Ricchiuto, chief economist at Mizuho Securities USA.
While hard to prove, he suspects "changes in health care laws are distorting the traditional relationship between employment and the economy.
The retail sector, where average hours worked are falling at the fastest pace in three decades, provides the clearest evidence of ObamaCare's impact.
Daniel Alpert, managing partner of Westwood Capital, calls ObamaCare's impact "a de facto Kurzarbeit (work sharing) phe nomenon that is distorting job creation and jobless claims data.
That refers to Germany's efforts to avoid layoffs with incentives for companies to cut worker hours not jobs and with government benefits for workers cut to part-time status.
But while ObamaCare's impact certainly seems to be material, it may not be the only force impacting jobless claims.
Rush To Retirement
Another candidate is the demographic shift that has seen baby boomers fare much better in the job market than other age groups since the start of the recession.
Now, older workers who hung on to their jobs amid economic uncertainty appear to be ready to retire in greater numbers.
After several years in which the number of workers claiming Social Security was on the decline, the ranks of benefit claimers have been on the rise in recent months. In April they climbed 21,000, or 10%, vs. a year earlier.
Whether they are laid off or retire, older workers — who now make up a bigger share of job holders — can fall back on Social Security retirement benefits rather than filing for unemployment.
Another possible factor depressing claims may be that many newly laid-off workers have previously exhausted their jobless benefits and not worked long enough to renew them.
Also, while claims and layoff data suggest low job cuts, actual gross hiring remains anemic, depressing net employment gains.