Jobless claims: close but no cigar for the red flag

by a New Deal Democrat

Jobless Claims: A Close Call, But Red Flags Persist , Initial claims fell -9,000 to 228,000 last week, and the four-week average fell -9,250 to 237,500. Continuing claims, one week late, rose 33,000 to 1.754 million:

More importantly for forecasting purposes, initial claims are up 7.0% year-over-year, the four-week average is up 10.6%, and ongoing claims are up 30.8%:

Just as importantly, the average for July so far is around 233,000, only about 8.4% above last year’s average for the month.

My discipline requires 2 consecutive months or 8 consecutive weeks of comparisons higher by 12.5% ​​or more on a yearly basis. Otherwise, the peak may just be transient noise. So with this week’s number, the chain is broken. Unless there is a sharp increase in new claims in the remaining weeks of July, there is no red signal for a recession.

However, with initial claims leading the jobless rate, the jobless rate is still forecast to rise slightly over the next few months:

Note that the unemployment rate in the graph above is depicted as a “percentage of percent,” so even a 10% year-over-year increase of 3.5% would only be about 3.9%, which is not enough to trigger Sahm’s rule.

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