More Americans filed unemployment claims benefits last week, but layoffs remain at historically low levels despite rising interest rates and a wave of job cuts in the media and technology sectors.
The Labor Department reported on Thursday that applications for unemployment claims benefit rose to 214,000 for the week ending Jan. 20, an increase of 25,000 from the previous week. The four-week average jobless claims, a less volatile measure, fell by 1,500 to 202,250.
Weekly unemployment claims are seen as representing the number of layoffs in the United States in a given week. It has remained at unusually low levels despite high interest rates and high inflation.
Although layoffs remain at low levels, there has been a slight increase in job cuts recently across technology and media.
Layoffs and acquisitions have hit a wide sector of the news industry over the past year. An estimated 2,681 jobs lost in the news industry as of the end of November.
The Federal Reserve raised its benchmark interest rate 11 times starting in March 2022 in an attempt to quell the four-decade-old high inflation that took control after an unusually strong economic recovery from the Covid-19 recession in 2020..
Although inflation has eased significantly last year, the Labor Department recently reported that overall prices rose 0.3% from November and 3.4% from 12 months earlier, a sign that the Fed’s campaign to slow inflation to its 2% target.
The Fed has left interest rates alone in its last three meetings and most economists expect multiple rates cuts this year.
Analysis of the Unemployment Claims Index: Weekly Volatility and Long-Term Trends
In the week ending January 20, the advance figure for seasonally adjusted initial Unemployment Claims was 214,000, an increase of 25,000 from the revised level of the previous week. The previous week’s level was revised upwards by 2,000 from 187,000 to 189,000. The 4-week moving average was at 202.250, down 1.500 from the previous week’s revised average. The previous week’s average was revised up 500 points from 203,250 to 203,750.
Here’s a closer look at the series since 2007, with an explanation of the past 12 months. The four-week moving average, which gives a clearer idea of the overall trend, currently stands at 202,250. This represents a decrease of 1,500 from the previous week’s figure and the lowest level since January 2023.
As we can see, there is a great deal of volatility in this indicator, which is why the four-week moving average is a more useful figure than weekly data. Here is the full data series dating back to 1967.
Barring the coronavirus spike, initial unemployment claims were no greater than 700,000 in a given week. However, we have modified the Y-axis so that we can get an enlarged view of the series where the coronavirus spike was not prominent.
Note the relationship between recessions and rising weekly unemployment demands. The 4-week moving average starts to rise at or before the start of a recession and reaches the relative peak at the end of the recession.
Insurance data against major jobless claims is adjusted seasonally, as in the charts above. What does seasonally unadjusted data look like? See the chart below, which clearly shows the high volatility of unadjusted data The four-week moving average gives an indication of the recurrent pattern of seasonal change (note, for example, those regular rises in January).
Surprise increase in US Unemployment Claims demands amid expectations of continued improvement
Initial Unemployment Claims in the United States rose more than expected last week, according to data released Thursday by the Labor Department, although the long-term trend still points to a decline. .
Total unemployment claims for the first time stood at 214,000 in the week ending Jan. 19, up 25,000 from the revised 189,000 the previous week, which rose by 2,000. The unanimous estimate was 200.000.
However, the four-week moving average fell by 1500 to 202250. Ongoing unemployment claims, the number of applications filed by those who had previously filed a preliminary claim, rose by 27,000 to 1.833 million.
It is that although the headline reading of jobless claims was strong, “this deviation [from expectations] can be attributed to an anomaly in the chain – where the overall trend remains strong.”
With seasonal fluctuations now mostly surpassing, significant increases in claims are unlikely. “We may see a modest rise in unemployment demands as labor market conditions improve further as growth slows in 2024. But we don’t expect a sharp rise in claims, as we look to slower job growth, but remain positive.
The Fed raised interest rates rapidly in 2022, with most analysts predicting that the US economy would slide into recession. But the economy and labor market remained surprisingly resilient, with the unemployment claims rate remaining below 4% for 23 months in a row, the longest period of its kind since the 1990s.
Overall, 1.83 million Americans were receiving unemployment benefits during the week ending Jan. 13, an increase of 27,000 from the previous week.
