- by New Deal democrat
Initial jobless claims have been plagued by apparent unresolved seasonality in the past several years, post-pandemic. I suspect that is still playing out, as evidenced by the past few weeks of claims.
Initial claims rose 11,000 to 235,000 last week, a seven week high. The four week moving average rose 4,500 to 226,250, the highest in four week. Meanwhile, with the usual one week delay, continuing claims rose 30,000 to 1.972 million, the highest since early November of 2021:
Last week I speculated that the steep decline in initial claims in July might have been due to seasonality issues around layoffs in the education sector, or might be a side effect of large scale deportation raids in some sectors. This week’s report makes me think it is more likely the former than the latter.
To show you why, here is the four week seasonally adjusted average since spring 2022 (blue), together with non-seasonally adjusted initial claims, averaged biweekly (red):
On a non-seasonally adjusted basis, initial claims always peak in January after the Holiday season, with a secondary peak when the school year ends in June. They make their lows around Labor Day, as the new school year begins. In the last several years, the seasonal adjustment has given us low readings in January (i.e., fewer layoffs than was usually the case pre-pandemic), but elevated readings in June and early July at the end of the school year, gradually declining through autumn.
This year the June employment report strongly suggested that end of school year layoffs were slightly askew compared with the last several years. Comparing the SA and NSA readings in the past several months suggests that has affected initial claims as well, with markedly fewer claims at the early July peak. But whereas NSA claims continued to decline through August last year, for the past three weeks this year they have held steady.
We’ll see if that continues to be the case in the next few weeks.
Returning to our regularly scheduled analysis, here are the YoY% changes that are more important for forecasting purposes. Initial claims were 1.3% higher than one year ago, while the four week average was down -3.9%. Continuing claims were higher by 6.1%:
This suggests that layoffs remain subdued, while hiring has seriously slowed down, but not enough to suggest that a recession is close at hand.
Finally, we’re far enough along in the month to take a look at the implications for the unemployment rate. The below graph looks at all three metrics by YoY% change:
This suggests that the the unemployment rate will remain very close to its 4.1%-4.2% of one year ago.
