Unemployment claims were steady last week, but have risen 30% in 2023

We’re seeing signs that unemployment claims are rising more meaningfully in the latest two readings, with recent claims coming more from the services industry.

In addition, the trend since the beginning of the year has been higher by 30%, a significant change of pace from what we saw during 2022.

Initial Claims

The seasonally adjusted advance figure for initial claims for the week ending June 17 remained at 264,000, mirroring the revised number for the prior week. This is slightly above the forecasted figure of 261,000, and reflects an increase of 30% year-to-date, indicating a higher than usual number of people seeking unemployment benefits.

The 4-week moving average for the period, which provides a broader view of the trend by minimizing weekly volatility, was 255,750. This was up 8,500 from the previous week’s revised average and marks the highest level for this metric since November 13, 2021, when it was 260,000.

Non-seasonally adjusted data tells a similar story. For the same week ending June 17, the unadjusted initial claims were 250,037, a minor decrease of 1,347 from the previous week. This decline was expected, though the anticipated decrease was slightly lower at 1,056. Compared to the same week in the previous year when the claims stood at 206,272, it's clear that the unemployment situation has deteriorated.

On the other hand, the seasonally adjusted insured unemployment rate remained static at 1.2% for the week ending June 10. However, the raw number of insured unemployed during the same week was 1,759,000, a decrease of 13,000 from the previous week.

This decrease suggests that while new claims are on the rise, the total number of those claiming benefits is experiencing a slight decline. One reason for this is that unemployment insurance is temporary and after it rolls off one is no longer counted among the unemployed.

Best and Worst Data from States

In terms of states, the highest insured unemployment rates were observed in California (2.3), New Jersey (2.1), and Massachusetts (1.9). The most significant increases in initial claims were reported in Texas, Minnesota, and Pennsylvania, while the most significant decreases were found in Tennessee, Massachusetts, and Idaho.

This recent data implies that more people are entering unemployment than expected, despite the steady insured unemployment rate. It's crucial to monitor these trends closely as they could signal larger, more concerning shifts in the job market. Furthermore, the fact that the increase in claims is consistent across both seasonally and non-seasonally adjusted data underlines the significance of this rise in unemployment.

We also heard additional commentary about last week’s reading from states with an increase of over 1,000 claims, where Texas, Montana, Pennsylvania, and Georgia led.

Most of the layoffs in these states seemed to be in the services industry, which could be interesting to monitor as we get flash ISM Services PMI tomorrow, and will have a chance to look at employment data and overall business activity.

ISM Services PMI Remains Key

We believe that monitoring ISM Services PMI for a more meaningful weakening is likely to lead to unemployment claims rising above 300,000 per week and a more meaningful weakening of the economy.

With the last reading coming in at 50.3, just a marginal level of expansion, it does seem that slowing growth could easily turn into a contraction in the months ahead.

If it does, we believe employment, and then the economy, will follow.