Today’s update on initial jobless claims reminds that the threat of economic contraction isn’t vanquished. There’s been progress, but the dark forces of decline are still lurking.
For the week ending July 25, the advance figure for seasonally adjusted initial claims was 584,000, an increase of 25,000 from the previous week’s revised figure of 559,000. A rise in new fillings for unemployment benefits is unsettling at this precarious stage in the economic cycle. Still, there’s nothing in today’s numbers that convinces us to alter our view that the technical end of the recession is near. For the moment, last week’s jump looks like statistical noise.

That’s not to say that all danger has passed—it hasn’t. But as our chart below reminds, the general trend in initial jobless claims remains one of decline. Then again, let’s not forget that new filings have risen for two weeks running, albeit off of a relatively low base by the standards of this year. Another week or two of this behavior and it may be time to rethink our otherwise favorable outlook that the cycle’s trough is unfolding right about now. We’d become more anxious if initial claims jumped above 600,000 in the coming weeks.

Meantime, weekly jobless claims are still signaling that the recession is about to end, if it hasn’t already. Having peaked back in March at 674,000, the decline since then suggests that the worst of the economic contraction is behind us. Then again, history is only a guide, not a guarantee.
There’s only one way to resolve the debate of whether we’re past the worst of this recession: More data. Jobless claims have been suggesting for several months that there’s light at the end of this tunnel. The only question is timing. The numbers of August, it seems, will be critical.


  1. Mark

    Throughout this post you conflate “worst being behind us” with “end of the technical recession is near”. Those two values are nowhere near equal, especially when you are talking about claims that are over 550,000.
    I think we may well print or come close to a positive 3Q GDP. Even if we do I do not believe this recession will be over. The NBER definition gives latitude and I think the end of this one will be a highly drawn out affair.

  2. JP

    When I talk of the worst being behind us, I’m speaking in relative terms, and across a number of economic metrics. For initial jobless claims, my comments anticipate that we’ll not see weekly filings at the previous high in this cycle (674,000/wk). Similarly, I don’t think housing will suffer as much as it has. And on and on. Does that mean all’s well. No, not by a long shot. I agree that the technical end of the recession, as I call it, will be followed by a longer-than-usual period of low growth, and perhaps even modest contraction. No one will confuse that with the rebound that typically follows the end of recessions. But I don’t think the numbers, on balance, will get any worse from here on out, as I’ve been writing for some time. The big question is when things start getting better? And on that score, I’m expecting a true recovery will take a while.

Comments are closed.