New filings for unemployment benefits in the US increased 13,000 last week to a seasonally adjusted 277,000, the Labor Dept. reports. That’s still a low number in historical terms and taken at face value the latest report implies that the labor market will continue to expand. But today’s release reveals a worrisome return of year-over-year gains in the data—for both seasonally adjusted and unadjusted figures. It could be noise, but the pattern of late is hinting at the possibility that the tide may be turning for this leading indicator.
It’s premature to assume the worst, but the claims reports in the weeks ahead deserve close attention. Meantime, today’s update shows that unadjusted claims increased a bit more than 3% vs. the year-earlier level. Year-over-year changes are considerably more reliable for analyzing this noisy data set. Filings have advanced on the year-earlier level in five of the past seven weeks. In other words, the trend has turned choppy over the last two months with an upside bias, which may be a signal that we’re witnessing a regime change.
It’s important to emphasize that it’s too early to make definitive judgments. This could turn out to be noise. But in the wake of the surprisingly weak employment report for May, it’s a bit harder to dismiss the upward bias that appears to be unfolding in the claims data for the one-year change.
It’s unclear if this is an early warning sign for the economy or just another bout of short-term turbulence. We’ll know more as the numbers roll in and I update the US Economic Profile for June next week. At the moment, hwoever, the trend in jobless claims is looking a bit less bullish from the vantage of annual changes.