Initial claims dropped from -26,000 last week to 239,000, the top of their former range this spring. The more important 4-week moving average rose 1,500 to 257,500, a new 18 month high. With a one-week lag, continuing claims declined from -19,000 to 1.742 million:

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For forecasting purposes, the more important comparison is YoY. By this metric, initial claims were up 12.2%, and the more important 4-week average was up 18.8%. Continuing claims were up 30.0%:

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Remember that, based on 50+ years of history before the pandemic, the dividing line for a “recession warning” is the 4-week or monthly average being up 12.5% for 2 months in a row. One year ago the 4-week average was in the vicinity of 215,000. 12.5% above that is 243,000. So whether the recent spike is a false alarm or not depends on whether in the coming weeks, initial claims are closer to the 260,000 level, or revert back to their prior range of 230,000-240,000.

Although I won’t post a graph this week, this continues to imply that the unemployment rate will rise slightly from one year ago. But it isn’t nearly enough to come close to triggering the Sham rule for recession nowcasting.

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