This week’s report on initial jobless claims was of particular interest, because of the issue of whether Federal employees laid off by the new Administration would cause an increase. It appears they did.

Initial jobless claims rose 22,000 for the week to 242,000, and the four week moving average rose 8,500 to 224,000. With the typical one week delay, continuing claims declined -5,000 to 1.862 million:

As you can see from the above graph, initial claims tied for the second highest weekly number in the past six months. A preliminary check of the state by state data indicates that there was a sharp increase in claims in Washington DC, but that would only marginally increase the weekly number. There was also a significant increase YoY in Virginia, but not in Maryland. So as an initial matter it appears that the Federal layoffs were only a part of this increase.

The sharp increase also showed up in the YoY% changes, which are more important for forecasting purposes. There, initial claims were up 13.6% YoY, the four week average up 7.0%, and continuing claims up 3.2%:

Of note, the average of the last two weeks in initial claims is +11.3% YoY.

These numbers are still neutral for forecasting purposes, since the four week moving average is more important than the noisy weekly numbers. But as per the above, that could change as early as next week.

Finally, let’s update our look at what this suggests about the unemployment rate in the months ahead, since initial claims in particular have a very long record of leading the unemployment rate:

On a monthly basis initial claims are up 7.0% YoY, and initial + continuing claims together are up 10.4%. Since one year ago the unemployment rate was 3.8%, for the first time in many months this suggests upward pressure on the unemployment rate, since 3.8%* 1.07 and *1.10 indicates an unemployment rate of 4.1% or 4.2%, vs. last month’s 4.0%.

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