Jobless claims drop as fraud claims are resolved

REAL ECONOMY BLOG | May 18, 2023

Authored by RSM US LLP

New filings for jobless benefits fell last week to 242,000 from 264,000, a sharp 8.3% drop, the Labor Department reported on Thursday.

The fall off came after fraudulent claims in Massachusetts—which were confirmed by state officials—had inflated the top-line number in the prior weeks. On a non-seasonally adjust basis, Massachusetts accounted for a drop of about 14,000 claims last week.

Despite the overall improvement, though, the number of new claims in Massachusetts remained relatively high compared to other states. This suggests that the issue of fraudulent claims has not been entirely dealt with.

When excluding the week ending May 6, the data revealed a relatively consistent rise in initial claims since early March—in line with the data obtained from payroll figures.

To mitigate the impact of fluctuations in the data, we turn to our preferred indicator—the 13-week moving average. This measure demonstrates a consistent upward trajectory in new claims, albeit without any alarming implications.

While layoffs are indeed increasing, people who lose their jobs continue to find new employment relatively easily, thanks to the prevailing robust labor demand.

This recent resilience in the labor market suggests that a recession may not take place until the third quarter, if at all.

A recession would materialize only in the event of a significant decline in employment, which is currently not the case. In fact, the economy continues to exhibit monthly net job gains exceeding 200,000, further bolstering this positive outlook.