US Initial Jobless Claims, provided by the US Department of Labor, provides underlying data on how many new people have filed for unemployment benefits in the previous week. One can gauge market conditions in the US economy around employment; as more new individuals file for unemployment benefits, fewer individuals in the economy have jobs. In normal times, this means people have less money to spend. Historically, initial jobless claims tended to reach peaks towards the end of recessionary periods, such as on March 21, 2009, when 661,000 new filings were reported.
Last week, initial claims unexpectedly increased from 242,000 to 264,000, a 9.09% advance. Forecasts called for a modest increase to 245,000; instead, claims-which act as a proxy for layoffs-rose to their highest level since October 2021. Continued unemployment claims, although by a more modest 0.67%, hitting 1.813 million. That is the highest level for continued claims since December 2021.
Despite a labor market that remains seemingly robust, new applications for unemployment benefits rose last week. In fact, they have been rising rather consistently this year, with the latest print yielding a 28.8% year-to-date increase. As with other economic indicators, unemployment claims have suffered from revisions and seasonal adjustments. Just last month, the Bureau of Labor Statistics announced that seasonal adjustments it had been using up until that point were not accurately representing the data, resulting in generally lower unemployment claims prints. Prior to a correction being made, there had only been a single print above 200,000 this year. After the revision, every claim since January has been above that threshold. This was to be expected, as the BLS was adjusting the data using partly the extreme outliers of the covid lockdowns, which would make any print that was even close to regular levels appear lower than usual. Claims were always going to increase from the lows they reached in 2022. However, this is an indicator that must be watched closely. Again, the labor market appears to remain in good shape, but any significant change would likely be preceded by a continued increase in unemployment claims past normal levels. Currently, claims are not too far off their pre-pandemic levels, when they averaged around 243,000 per week. Where they go from here will be essential to gauge economic conditions in the short term.
May 11, 2023