The jury’s still out on when the recession will end, but the case for arguing that the pace of economic contraction is slowing got another boost this morning with the weekly update on initial jobless claims.

For the week through May 16, new filings for unemployment benefits dropped by 12,000 to 631,000, the Labor Department reports. That’s a clear signal that the recessionary winds are still blowing hard. But as we’ve been arguing for several months, including here, a topping out in new reported claims may signal the negative economic momentum is ebbing. Today’s update continues to suggest that we’re at or near the trough of the recession. Or, if you’re an optimist, you might think that the trough came a month or two back.

The reasoning for considering jobless claims as an early clue of the general economic trend is suggested by the historical record, as we explained here. By that standard, today’s numbers lend a bit more confidence that the downturn’s low point has arrived, or perhaps just passed. But keep in mind that even if that’s true, that leaves plenty of recessionary months ahead before growth returns. The NBER dates the start of the current recession to December 2007. If we assume that we’re now halfway through the contraction, the return of growth is still a ways off. The IMF’s current forecast for the U.S. predicts the economy will simply tread water next year. If you’re a bit more bullish, you might expect modest growth for 2010.

All of this assumes that the dreaded double-dip waiting isn’t waiting in the wings. Given the weakened state of household finances, consumer spending may fall further, in which case corporate spending would have to fill the gap to keep GDP from slumping longer and/or deeper than the crowd currently expects. That’s a tall order at the moment: businesses are still likely to err on the side of defense these days. That will change, but until we get more visibility on consumer sentiment for the next 6-12 months, it seems unwise to expect corporate America to embark on a spending spree any time soon. Consumers, after all, account for about 70% of GDP, and so Joe Sixpack’s outlook is critical. Given the lightness in his wallet, however, the case for caution is still compelling.

So, yes, today’s news on jobless claims is welcome and encouraging. But it’s still only one statistic. The odds remain high against a quick turnaround. Meanwhile, perhaps we have a 50/50 chance of sidestepping another round of economic weakness. But don’t count out more bad news just yet. No matter how you slice it, this is still a vicious recession, and so negative surprises are still possible if not likely.