Initial weekly requests increase for the fourth time in the last …

Initial claims for regular state unemployment insurance increased by 6,000 in the week ending July 30, to 260,000. The previous week’s 254,000 has been revised down from the initial tally of 256,000 (see first chart). Measured as a percentage of non-farm payrolls, compensation claims stood at 0.152 percent for June, up from a record low of 0.117 in March, but still very low (see second graph).

The four-week average has increased for the sixteenth time in the past seventeen weeks (the four-week average has remained unchanged in one week) to 254,750, up 6,000 from the previous week. Weekly initial claims data continue to suggest a tight labor market, although the recent sustained upward trend points to some easing. Continued rising rates of price increases, the Fed’s aggressive tightening cycle and the fallout from the Russian invasion of Ukraine pose risks to the economic outlook.

The number of applications pending for state unemployment programs was 1,444 million for the week ending July 16th, a decrease of 3,412 compared to the previous week (see third graph). Continuing government credit has also been on the rise in recent weeks (see third graph).

The latest results for the combined federal and state programs show the total number of people claiming benefits across all unemployment programs at 1.473 million for the week ending July 16th, a decrease of 3,890 compared to the previous week. The latest result is the twenty-third consecutive week under 2 million.

Initial claims remain at a very low level by historical comparison, but a clear upward trend has emerged, suggesting that, marginally, the labor market has started to ease. Initial weekly claims for unemployment insurance are an AIER leading indicator and remained a favorable contributor in the July update. However, given the upward trajectory, it is likely to turn into a neutral position in the next updates. Furthermore, the number of open jobs in the country has decreased for three consecutive months, although the level remains very high compared to the historical comparison.

While the overall low level of compensation claims combined with the high number of jobs open suggests that the labor market remains strong, both measures are showing signs of weakening. The strained labor market is a crucial component of the economy, as it provides support for consumer spending. However, consistently high rates of price increases already weigh on consumer attitudes and, if consumers lose confidence in the labor market, they can significantly reduce spending. The outlook remains very uncertain.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 after more than 25 years of researching the economic and financial markets on Wall Street. Bob previously headed Global Equity Strategy for Brown Brothers Harriman, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.

Prior to BBH, Bob was Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist at Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a business degree from Fordham University and a business degree from Lehigh University.

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