Initial jobless claims

Red Flag Warning: Initial Jobless Claims Approach Alarming Levels

– by a New Deal Democrat

Initial claims for jobless benefits rose 12,000 last week to 248,000. The 4-week average fell -3,500 to 253,250. One week late, continuing claims fell -13,000 to 1.20 million:

More importantly for forecasting purposes, initial claims increased 17.1% year over year. The more important 4-week average is up 18.1% and ongoing claims are up 27.0%:

This is the 4th week in a row that the 4-week moving average has risen more than 12.5% ​​year-over-year.

In addition, average monthly initial claims increased by 18.5% for the month of June as a whole:

This is the first month in which claims are up more than 12.5% ​​year-on-year. If they remain higher than 12.5% ​​for July, it will trigger a red flag warning of a recession. In the graph above, I have also shown the year-on-year change in the unemployment rate. It is a “percent of a percent.” The unemployment rate was 3.6% in June 2022. Since initial claims lead the unemployment rate, this suggests that it will rise 0.36% (or possibly more) above that level in the coming months, or to about 3.9%. It still won’t trigger the “Sahm ​​Rule” that retroactively tells us we’re already in a recession, but it will be much closer.

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