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Jobless claims continue to trend higher, but no recession signal yet

Summary:
Jobless claims continue to trend higher, but no recession signal yet  – by New Deal democrat Initial jobless claims rose 9,000 to 244,000 last week, a 7.5 month high. The 4 week average rose 3,250 to 235,750, a 7 month high.  But the news wasn’t all negative, as continuing claims declined 41,000 to 1,331,000, which is only 25,000 above their 50 year low set on May 21: Two weeks ago I noted that reviewing the entire 50+ year history of initial claims, “there are almost always one or two periods a year where the four week moving average of jobless claims rises between 5% and 10%. About once every other year for the past 50+ years, it rises over 10%. Typically (not always!) it has risen by 15% or more over its low before a recession has begun.

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Jobless claims continue to trend higher, but no recession signal yet

 – by New Deal democrat

Initial jobless claims rose 9,000 to 244,000 last week, a 7.5 month high. The 4 week average rose 3,250 to 235,750, a 7 month high.  But the news wasn’t all negative, as continuing claims declined 41,000 to 1,331,000, which is only 25,000 above their 50 year low set on May 21:

Jobless claims continue to trend higher, but no recession signal yet

Two weeks ago I noted that reviewing the entire 50+ year history of initial claims, “there are almost always one or two periods a year where the four week moving average of jobless claims rises between 5% and 10%. About once every other year for the past 50+ years, it rises over 10%. Typically (not always!) it has risen by 15% or more over its low before a recession has begun. And a longer term moving average of initial claims YoY has, with one exception, turned higher before a recession has begun.”

Both initial and, this week aside, continuing claims have been continuing to drift higher, and since that uptrend has lasted for more than 3 months, they are no longer a positive indicator. Indeed, initial claims are almost 50% higher than their low for the cycle, meaning they fulfill the first of the two above criteria to signal a recession is near. Further, if the present trend continues for about 3 more months, initial claims will be higher than 1 year previous, which would fulfill the second criteria as well.

But we’re not there yet, so initial claims aren’t negative, signaling recession.

Dan Crawford
aka Rdan owns, designs, moderates, and manages Angry Bear since 2007. Dan is the fourth ‘owner’.

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