This was a very light week of economic news, so in this update, we’ll focus on the weekly labor data to help refine and update the recession probability and timing.
Initial jobless claims jumped sharply in the first week of June, rising to 261,000. Initial jobless claims are certainly a volatile series, but the upward trend is undeniable. The level of initial claims is higher than at any point in 2018 or 2019.
The 2023 level of initial jobless claims has held above the average level of 2018 and 2019, with a gap that is widening.
On the left, we can see the level of initial jobless claims today compared to the average of 2022, 2019, and 2018. On the right is the level of initial jobless claims compared to the average of just 2019 and 2018.
The level of claims today is about 15% higher than our two baselines, a level that is historically consistent with early recessionary periods. More important is the trend, rising from the -20% level in week 1 of 2023 to +15% in the most recent report.
Before moving on to continued jobless claims, I want to emphasize why this analysis is important. If we look at the year-over-year change in continued jobless claims, we see that anytime there is more than a 10% increase, the economy is usually entering a recession or already in recession, as was the case in the 1974 recession.
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