Initial claims declined from -9,000 to 228,000 last week, and the four-week average declined from -9,250 to 237,500. Continuing claims, with a one-week delay, rose 33,000 to 1.754 million:

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More importantly for forecasting purposes, initial claims are up 7.0% YoY, the four-week average up 10.6%, and continuing claims up 30.8%:

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Just as importantly, the average for July so far is about 233,000, only about 8.4% above last year’s average for the month.

My discipline requires 2 straight months, or 8 weeks in a row, of comparisons higher by 12.5% or more YoY. Otherwise, the spike could just be transitory noise. Thus, with this week’s number, the chain has been broken. Unless there are sharp increases in new claims in the remaining weeks of July, there is no red flag recession signal.

Despite that, since initial claims lead the unemployment rate, a slight increase in the unemployment rate during the next few months is still forecast:

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Keep in mind that the unemployment rate in the above graph is rendered as a “percent of a percent,” so even a 10% YoY increase from 3.5% would still only be about 3.9%, not enough to trigger the Sahm Rule.

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