I have started to monitor initial jobless claims to see if there are any signs of stress.
My two thresholds are:
1. If the four week average on claims is more than 10% above its expansion low.
2. If the YoY% change in the monthly average turns higher.
Here’s this week’s update.
Initial claims last week were 222,000. The four week moving average was 217,750.
First, the four week average is only 8.1% above its recent low:
Second, the YoY% change for this week is only lower by -1.8%. For the first two weeks of June, it averages +0.5% higher:
Finally, last week I noted that, since initial claims tend to slightly lead the unemployment rate, I expected a slight increase in the unemployment rate in last week’s jobs report. Instead, it remained at 3.6%. Here’s the updated look at the YoY% change in the four week average (blue) compared with the YoY change in the unemployment rate (red):
Obviously the relationship does not hold exactly for every month, but I still expect the very small YoY change in initial claims to show up in a very small (as in -0.1%) decline in the monthly unemployment rate shortly.
For now, initial claims are only signaling a little bit of weakness, but nothing to be imminently concerned about.