Extremely Low Jobless Claims Forecast Unemployment Rate Declining Below 4%

Let’s take our regular weekly look at jobless claims. As a reminder, I look at these because they are an excellent short leading indicator for the economy.

Last week new jobless claims declined -1,000 to 197,000, continuing its streak of number close to all time historical lows. Thew four week moving average declined -1,750 to 202,250. With the typical one week delay, continuing claims rose 2,000 to 1.719 million:

Note that initial claims in particular are close to their previous all-time post-pandemic lows set in 2022.

On the YoY% basis more important for forecasting purposes, initial claims were down -10.0%, the four week moving average down -14.6%, and continuing claims down -10.3%:

All of these are extremely positive for the economy - indeed the most positive in thew past three+ years.

Lastly, the last time initial and continuing claims were at these levels, the unemployment rate was at 3.7%-3.9%:

In other words, this forecasts that the unemployment rate will continue to decline in the next several months not just to 4.0%, but likely even lower. We’ll find out a week from tomorrow.