Thursday, March 16, 2023

Jobless claims: nobody is (still!) getting laid off


 - by New Deal democrat

Initial jobless claims declined -20,000 this week, back below 200,000 to 192,000. The 4 week average declined -750 to 196,500. Continuing claims, delayed one week, declined -29,000 to 1.684 million:

For all intents and purposes, it is still the case that “nobody” is getting laid off.

As the above graph shows, we are now almost one year past the lowest level of new jobless claims in history. Needless to say, this affects the YoY comparisons, which are now higher:

On a weekly basis, new jobless claims are 8.5% higher than one year ago, and continuing claims are 5.6% higher. The much more important 4 week average of new claims is 4.1% higher.

None of this is anywhere near signaling a recession warning. I would need to see the 4 week average at very least 10% higher, and lasting for longer than a month at such levels to even raise a yellow flag.

Finally, to pick up further on jobs vs. retail sales, which were reported yesterday, a corollary to the observation that consumption leads jobs is that retail sales tend to grow faster than jobs earlier in expansions, but grow slower than jobs late in expansions. The below graph subtracts the rate of jobs growth from the rate of retail sales growth to show that:

When the line is rising, sales are growing relatively faster than jobs. When the line is declining, jobs are growing faster than sales. The “zero” line in the graph is the rate at roughly the midpoint of the last 3 expansions. 

There was a huge shortfall in jobs growth compared with sales growth due to the pandemic. There has since been huge jobs growth to close that gap in the long-term trend. It is still about 4.4% from closing, historically still very wide, but declining fast. Remember that the gap can be closed by a decline in sales, an increase in jobs, or both.