Jobless claims jump up to highest levels of the year
Slow softening in labor market continues, but some think we are hitting a "sweet spot"
The number of Americans filing for initial jobless claims for the week ending July 13 popped up to 243,000 in seasonally adjusted terms, tying their highest level of the year.
But with the pandemic having wreaked havoc upon the typical seasonal patterns of spending, hiring, and firing, I’ve tended to look more at the raw, unadjusted jobless claims compared to years prior to get a sense of how the labor market is evolving.
For the first time this year, jobless claims are higher than they were, on average, from 2015 to 2023 (stripping out 2020 through 2022 in light of COVID-induced distortions).
The impact of Hurricane Beryl is putting some idiosyncratic upward pressure on initial jobless claims — Texas’ figure rose by 11,537 last week (compared to an increase of just 1,267 during the same period in 2023). And of course, jobless claims remain near historical lows in outright terms or when adjusted for the size of the labor force. The labor market is still in a very solid position, all things considered.
One thing you’ll notice is that this early summer period is a time when claims tend to climb. But one feature of the post-pandemic labor market has been the tendency for lower filings during times when they tend to seasonally pick up. Just look at the start of the year, after the holiday shopping season is over: unadjusted jobless claims have been way lower in 2023 and 2024 than they were, on average, during the five years preceding the pandemic.
This is part and parcel of a “labor hoarding” dynamic – as the economy reopened with incomes in good shape but supply still constrained, companies scrambled to staff up and meet demand. Employers still seemingly cognizant of, if not scarred by, that episode: the layoffs and discharge rate remains quite depressed. Overall, labor churn — both hiring and firing — is low.
A return to more seasonal patterns of layoffs is worth monitoring going forward, as it could be an indication that the “labor hoarding” fever is breaking, and companies are more willing to find ways to trim headcount and costs to adjust to the slower nominal growth environment.
“One development in the past few months with significant implications for monetary policy is that labor supply and demand have finally come into rough balance,” said Federal Reserve Governor Christopher Waller in a speech on Wednesday. “But we need to keep the labor market in this sweet spot.”
