Thursday, July 6, 2023

Initial jobless claims: moving closer to a red flag warning


 - by New Deal democrat

Initial claims for jobless benefits rose 12,000 last week to 248,000. The 4 week average declined -3,500 to 253,250. With a one week lag, continued claims declined -13,000 to 1.20 million:

More importantly for forecasting purposes, initial claims are up 17.1% YoY. The more important 4 week average is up 18.1%, and continuing claims are up 27.0%:

This is the 4th week in a row that the 4 week moving average has been up by more than 12.5% YoY. 

Additionally, averaged monthly initial claims were up 18.5% for the month of June in its entirety:

This is the first month that claims have been higher YoY by more than 12.5%. If they remain higher than 12.5% for July, that will trigger a red flag recession warning. In the above graph I have also shown the YoY% change in the unemployment rate. This is a “percent of a percent.” The unemployment rate was 3.6% in June 2022. Since initial claims leads the unemployment rate, this suggests that it will rise 0.36% (or possibly more) above that rate in the coming months, or up to about 3.9%. This would not yet trigger the “Sahm Rule,” with retroactively tells us we are already in a recession, but it would be much closer.