It’s Still A Historically Low-Fire Economy; And The Trend In The Unemployment Rate Is Still Downward

Let’s take our regular weekly look at jobless claims. Additionally, let me use this as an opportunity to delve a little further into the unemployment rate as reported in last Friday’s jobs report.

Last week initial jobless claims rose 9,000 to 200,000, still an excellent number. The four week moving average was unchanged at 195,250, close to its all time historical lows. And with the typical one week lag, continuing claims declined -20,000 to 1.697 million, also an excellent number:

As usual, the YoY% changes are what tell us what is likely ahead in the near term for the economy as a whole. On that basis, all were -here’s that word again - excellent! Initial claims were down -12.3%, the four week average down -14.0%, and continuing claims down -12.8%:

While I’m at it, let me update my “quick and dirty” forecast, including the YoY% change in stock prices (note that jobless claims are inverted in the below graph):

Despite the recent AI-related sell-off, the S&P 500 is still up almost 10% YoY, so the “quick and dirty” forecast is for continued expansion in the next few months.

As I usually note, new jobless claims have a 60 year history of leading the unemployment rate. Here’s the update on that, including (orange) the two numbers that make the unemployment rate: the number of unemployed divided by the number of people in the labor force, which last month was 4.14% rounded to 4.1% in the official rate:

While the unemployment rate seems to be a little stubborn about following the number of newly laid off workers down, the downward trend is nonetheless apparent. Interestingly, by looking at the component parts: the number of unemployed and the number of people in the labor force, here:

It appears that in the last few months there has been a rebound in the number of people in the labor force, suggesting there have been new entrants to the labor force who may be having a little more difficulty than in the past several years securing employment to their liking. In any event, as I wrote above, the overall downward trend is intact, and all things being left to themselves, I continue to expect a sub-4.0% unemployment rate in the months ahead.