– by a New Deal Democrat
Approaching a Red Flag: Initial Claims and the Recession Warning , Initial jobless claims fell -12,000 last week to 237,000. The four-week average fell from -6,750 to 246,750. One week late, continuing claims rose 11,000 to 1,729,000:
More importantly for forecasting purposes, the year-over-year increases are respectively 7.2% for the weekly number, 14.5% for the 4-week average and 31.6% for ongoing claims:
This is the 4th week in a row that the 4-week average is up more than 12.5% year-over-year. If this continues for a few more weeks, it would be enough to trigger a red flag recession warning from this series.
Finally, since initial claims have a long-established history of leading jobless rates, here’s a comparison of annual claims averaged monthly (blue) as well as the 4-week average versus the year-over-year change in the unemployment rate (gold ) :
Note that the chart above measures the change in the unemployment rate as a “percentage of percent,” so for example, a 10% increase from 3.6% would be just under 4.0%. To trigger Sahm’s rule, we would need a 0.5% increase in the actual rate from the 3-month average of the lowest unemployment rate over the past year. To put it plainly: for forecasting purposes, we’re not there yet. But since Sahm’s rule tells us retrospectively when we started a recession, it doesn’t affect my own predictive analysis.
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