Weekly Initial Claims Rise to an Eight-Month High

Initial claims for regular state unemployment insurance rose 7,000 for the week ending July 16^th, coming in at 251,000. The previous week’s 244,000 was unrevised from the initial tally (see first chart). Weekly claims are at the highest level since November 13^th. However, by long-term historical comparison, initial claims remain very low (see second chart).

The four-week average rose for the fourteenth time in the last fifteen weeks (the four-week average was unchanged in one week), coming in at 240,500, up 4,500 from the prior week and at the highest level since December. Weekly initial claims data continue to suggest a very tight labor market, though the recent sustained upward trend indicates some easing. Continued elevated rates of price increases, an intensifying Fed tightening cycle, and fallout from the Russian invasion of Ukraine represent risks to the economic outlook.

The number of ongoing claims for state unemployment programs totaled 1.325 million for the week ending July 2^nd, a drop of 47,074 from the prior week (see third chart). State continuing claims have now fallen in two of the last eight weeks (see third chart).

The latest results for the combined Federal and state programs put the total number of people claiming benefits in all unemployment programs at 1.353 million for the week ended July 2^nd, a decrease of 47,842 from the prior week. The latest result is the twenty-first week in a row below 2 million.

Initial claims remain at a very low level by historical comparison, but a clear upward trend has emerged, suggesting that, on the margin, the labor market has begun to loosen. Weekly initial claims for unemployment insurance is an AIER leading indicator, and remained a favorable contributor in the June update. However, given the upward trajectory, it will likely turn to a neutral position in coming updates. Furthermore, the number of open jobs in the country has receded for two consecutive months, though the level remains very high by historical comparison.

While the overall low level of claims combined with the high number of open jobs suggest the labor market remains solid, both measures are showing signs of softening. The tight labor market is a crucial component of the economy, providing support for consumer spending. However, persistently elevated rates of price increases already weigh on consumer attitudes, and if consumers lose confidence in the tight labor market, they may significantly reduce spending. The outlook remains highly uncertain.