Initial jobless claims fall to lowest in a month

REAL ECONOMY BLOG | February 22, 2024

Authored by RSM US LLP

Initial claims for unemployment insurance have once again defied expectations this year, continuing to signal a tight labor market that benefits workers.

New claims fell by 12,000 to 201,000 for the week ending Feb. 17, according to the Labor Department’s data on Thursday.

With the exception of a brief period of six to eights months last year, during which new claims consistently hovered near 250,000—our recession threshold—the proxy for layoffs has stabilized around the 2019 level of 218,000.

Our preferred metric—the 13-week moving average—dropped to 210,000, the lowest level since February 2023.

We don’t view a low claims number as a reason to worry about a rebound in inflation pressure just yet. A well-anchored initial claims level that hovers around the pre-pandemic average is a positive sign for a healthy labor market, particularly in terms of sustainable wage growth.

Taking a step back, there are more reasons to believe that the labor market will cool this year, yet the imbalance between the demand and supply of labor might not ease that quickly unless there is an economic downturn.

In our base case, there is only a 15% chance of a recession over the next 12 months, meaning that the labor market should stay resilient, giving the economy ample support to be on a solid footing as we approach a soft landing.

Inside the data, continuing claims also dropped for the week ending Feb. 10, reaching the lowest level in a month. On a nonseasonally adjusted basis, California and Kentucky posted the biggest declines.