Jobless Claims – A Positive Barometer, For Now

There have been a few very consistent good news stories over the last few years.  And one of them is the story behind initial jobless claims.   Claims, in case you don’t know, tracks how many people file for unemployment insurance every week.  It’s virtually a real-time jobs data point since it’s released every single week.

The latest data at 323,000 showed the lowest claims data since Q4 2007.  That brings our 4 week moving average to 336,750.  That’s good news.  It bodes well for the labor market and shows that the private sector is increasingly picking up the slack on the hiring front.

So it’s all good right?  Well, kind of.  I’ve been pretty vocal in recent years about the no recession risk in the USA.  I think this latest claims data continues to confirm that view.  But we also have to become increasingly mindful of history.  One thing you’ll notice about claims is that the economy tends to top out when claims breach the 300,000 level.



In other words, as you can see in the chart below, the economy tends to start stagnating when claims reach that level.  And that tends to be a precursor to economic slowdown.  The good news is that we’re still not there.  The bad news is that we’re a lot closer to the end of the cycle than we are to the beginning.




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Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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  • Joseph Browning

    Hrm… I wonder if the cycle will be a bit longer on the lower end than normal due to the size of the pool of potential workers that could be pulled back into work? In other words, does the magnitude on employment of this most recent downturn extend the period of low jobless claims or is it immaterial?

  • LVG

    So does this mean the cycle will be longer because the unemployment rate could go much lower? Or does it mean the cycle will be shorter because we seem to have a structural unemployment problem?

  • Johnny Evers

    A skeptic would say that new jobless claims are bottoming because the working class has pretty much been permanantly outsourced.
    I guess we’ll find out going forward if the job losses of the past half-decade were structural or cyclical.

  • Pacioli

    Mr. Roche – I’d be very interested on your thoughts regarding the concept of ‘labor hoarding’ outlined here:

    Also, I don’t agree with your conclusion, based on the claims report, that “It bodes well for the labor market and shows that the private sector is increasingly picking up the slack on the hiring front.”

    The claims report says nothing at all about “the hiring front”. It only relates to firings.

  • Charles Fasola

    I suggest you spend some time hitting the pavements searching for employment for a non-specialized, lower skilled position. Or for a manufacturing or construction job; yes there are quite many folks who are in that boat. I believe your comments will be much different. There is indeed a forest hidden beyond the high rises you fail to see.