Initial Claims Rose Sharply but the Labor Market Remains Tight
Initial claims for unemployment insurance jumped to 252,000 for the week ended December 7 versus 203,000 in the prior week (see chart). The latest reading is the highest result since September 30, 2017. The four-week average rose to 224,000 from 217,750 in the prior week.
Weekly initial claims data tend to be quite volatile, especially around the holidays. Despite the surge in the latest weekly data, claims overall remain at historically low levels, hovering near the lowest levels since the late 1960s. The four-week average has been trending essentially flat since the beginning of 2018 and is also close to five-decade lows.
Measured as a percentage of employment (employment is much larger now than in the 1960s and early 1970s), initial claims are near record lows, well below the percentage seen in the 1960s and 1970s (see chart).
Furthermore, the latest employment report showed private-sector nonfarm payrolls added 254,000 in November following a gain of 163,000 in October and 183,000 in September. Over the past year, private payrolls have added 2.0 million workers or an average of 170,000 per month, a very solid pace of increase but below the 2018 average of 215,000 new private-sector employees per month. As of the end of September, there were approximately 6.3 million private-sector job openings, resulting in an openings rate of 4.7 percent. The unemployment rate in November was just 3.5 percent, matching a 50-year low.
Overall, while claims jumped in the latest week, the labor market remains tight. Mixed data on other sectors of the economy combined with nearly-neutral readings from the AIER Leading Indicators Index suggest continued economic growth but caution is warranted.
Robert Hughes
Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
