I’ve been writing for the past number of weeks that we were approaching the acid test for the hypothesis that unresolved post-pandemic seasonality explained the sharp increase in jobless claims in the summer. This week we are fully immersed in the 6+ month comparison period where initial claims in the past two years averaged between 200,000-220,000.

So, first the good news: initial claims declined -4,000 to 218,000, to the lowest level in over four months, and putting them in that range. The four week moving average, which has a few weeks to go before its transition period is over, declined -3,500 to 224,750, also the lowest in four months. Continuing claims, with their typical one week lag, increased 13,000 to 1.834 million:

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Now, the not bad, but ‘meh’ news: on the YoY basis more important for forecasting purposes, initial claims are up 2.3%, the four week average up 2.4%, and continuing claims up 2.2%:

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While continuing claims continue to have their best YoY comparisons since February 2023, this is the weakest showing for initial claims and their four week average since last December, outside of a brief period in February.

Which means that initial claims are no longer a “positive” for the economy. On the other hand, they aren’t recessionary or pre-recessionary either. That would require at minimum 10% or higher YoY comparisons lasting for two months or more. Initial claims are now a ‘meh,’ or neutral for economic forecasting purposes.

Finally, we do get the monthly jobs report next week, so let’s update our look at jobless claims vs. the unemployment rate. Recall that for 60 years, the former has led the latter. This past year has seen the relationship break, mainly due to a huge increase in new entrants to the labor force via immigration:

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But for the outsized influx in immigration, jobless claims indicate that the unemployment rate should be in the 3.7%-3.9% range - which isn’t bad at all.

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