Some observers believe that an increase in unemployment insurance claims indicates that we are in or about to be in a recession (eg, [1]). Here’s another view (follow-up to “so you think we might be in a recession today”) first part, the second part, the third part, the fourth part, the fifth part, the sixth partand “so you think we might be in a recession by mid-June”, first part and the second partand “So you think we might be in a recession by mid-July.”)
R. Walker from Goldman Sachs today:
Initial jobless claims rose by nearly 100,000 since a low of 166,000 in March. While jobless claims remain at a historic low of 260,000, the rapidly deteriorating situation has led some market participants to believe that the labor market is slowing more than other indicators suggest.
However, we find that two distortions explain most of the increase in initial claims. First, about half of the increase appears to be a statistical illusion created by the residual seasonality that emerged after the Labor Department reintroduced multiplicative seasonal adjustment earlier this year. …
Second, initial jobless claims rose sharply in Connecticut and Massachusetts last month (by roughly 20,000 in total), possibly overstating the actual number of layoffs.
After adjusting for these two distortions, GS concluded that the increase in initial claims for unemployment insurance was much smaller.
resource: Ronnie Walker, “Explaining the Recent Rise in Initial Jobless Claims,” Goldman Sachs, August 10, 2022.
If one doubts these adjustments, one can also calculate the 3-year change in the seasonally unadjusted series to see if claims are indeed rising rapidly.
