Jobless Claims Virtually Screaming For Lower Unemployment Rate; Is Post-Pandemic Seasonality Making A Return?

We are - maybe! - finally seeing some of the unresolved post-pandemic seasonality reasserting itself as to initial jobless claims.

For the record, initial claims rose 13,000 to 225,000 last week, the highest number since early February. The four week average rose 6,500 to 214,750. With the typical one week delay, however, continuing claims declined -8,000 to 1.777 million:

The increase in new claims is noteworthy because for the last three years until last July, even after seasonal adjustment claims had a pattern of bottoming at year end and then rising through late winter and spring until midyear, before declining again. That pattern began to break last summer, as become more apparent when we look at the YoY% changes which are more important for forecasting purposes:

On that basis, initial claims are down -7.8%, the four week average down -7.7%, and continuing claims down -6.3%. But note that beginning last July, even in the face of virtually no job growth whatsoever, jobless claims turned down YoY. They then resumed that YoY decline in earnest last October, and the YoY comparisons have become increasingly negative (a good thing for the economy!) ever since.

Well, we’re coming up on the one year anniversary of that change of regime, so it will be interesting to see if the negative YoY comparisons continue, or if they fade away. This week’s numbers are noteworthy in that regard, because they suggest that - maybe - the pattern of increased claims into midyear is reasserting itself. We’ll find out over the course of the summer.

The source of the change in regime probably has to do with the near total collapse in new immigration to the US, and deportations of both Los Illegales, but also detentions and in some cases deportations of green card holders and even a few US citizens; although the exact chain of causation is somewhat obscure.

Finally, let’s take our final look at what these numbers portend for the unemployment rate, which will be updated for May tomorrow:

The sharp declines in both initial and total unemployment claims, which have a decades’ long history of leading the unemployment rate, suggest in the strongest terms that the unemployment rate will not just not increase or stabilize, but actually decline towards 4% or possibly even lower in the next few months. We’ll see how that plays out for May tomorrow.