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Weekly Initial Unemployment Claims Fell Slightly

Initial claims for regular state unemployment insurance fell by 1,000 for the week ending January 7th, coming in at 205,000. The previous week’s 206,000 was revised up from the initial estimate of 204,000 (see first chart). The back-to-back drops put weekly claims at the lowest level since September 24th despite having risen in nine of the last seventeen weeks. The four-week average of weekly initial claims fell to 212,500, down 1,750 for the week. That is the fifth consecutive decline, putting the four-week average at the lowest level since October 15th (see first chart).

When measured as a percentage of nonfarm payrolls, claims came in at 0.138 percent for December, down from 0.145 in November but above the record low of 0.117 in March (see second chart). While the level of weekly initial claims for unemployment insurance remains very low by historical comparison, there have been mixed signals recently, raising some concern.

Job-cut announcements appear to be in a rising trend. Job cut announcements totaled 43,651 in December, below the 76,835 announced in November but still the second-highest level since January 2021 (see third chart). The three-month average hit 51,443 for December, well above the recent low of 17,520 in September 2021 and up sharply from 25,428 just three months ago. While the data continue to imply a tight labor market, the rising trend in job cut announcements is a concern. Furthermore, continued elevated rates of price increases, an aggressive Fed tightening cycle, and fallout from the Russian invasion of Ukraine remain risks to the economic outlook.

The number of ongoing claims for state unemployment programs totaled 1.706 million for the week ending December 24th, an increase of 133,771 from the prior week (see fourth chart). State continuing claims have been trending higher since early October (see fourth chart).

The latest results for the combined Federal and state programs put the total number of people claiming benefits in all unemployment programs at 1.734 million for the week ended December 24th, an increase of 132,576 from the prior week.

While the overall low level of initial claims suggests the labor market remains tight, there have been some mixed signals recently. The tight labor market is a crucial component of the economy, providing support for consumer spending. However, persistently elevated rates of price increases already weigh on consumer expectations for the future, and if consumers lose confidence in the labor market, they may significantly reduce spending. The outlook remains highly uncertain.

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