Initial jobless claims rise to eight-month high

REAL ECONOMY BLOG | July 21, 2022

Authored by RSM US LLP

New filings for jobless benefits rose more than expected last week to an eight-month high of 251,000, continuing to show signs of increases in layoffs amid an economic slowdown.

That was also the seventh week in a row that new jobless claims stayed above the pre-pandemic average, government data released on Thursday showed.

We expect the climb in new claims to continue as more companies have announced layoffs or a pause in hiring in recent weeks, notably big-cap companies like Apple, Google and Microsoft.

The pace of increases in new jobless claims, however, remained slow, most likely because of outsized labor demand.

While the effect of the Fed’s aggressive rate hikes has started to appear in sectors like technology and housing, which are among the most sensitive to interest rates, it will take a bit longer for the real economy to feel the full weight of a slowdown in economic activities.

As a result, we do not expect any sharp spike in jobless claims in the coming months as the economy continues to add more jobs. If labor demand continues to outpace supply, we expect the increases in new jobless claims to be gradual and orderly.

The data

The four-week moving average continued to rise, reaffirming the short-term upward trend despite the weekly volatility of the series.

Our preferred measure—the 13-week moving average—also increased to 221,000, surpassing the pre-pandemic level of 218,000 for the first time since February.

Continuing claims for the week ending July 9 rose to 1.384 million from 1.331 million as new claims piled in.