Initial claims for regular state unemployment insurance rose 27,000 for the week ending June 4, coming in at 229,000, the highest level since January 15th (see first chart). Still, claims have decreased in 13 of the last 20 weeks but the decreases, averaging -11,000, are smaller than the seven increases which have averaged 18,000. By long-term historical comparison, initial claims remain extremely low.
The four-week average rose for the eighth time in the last nine weeks, coming in at 215,000, up 8,000 from the prior week and at the highest level since March 12th. Weekly initial claims data continue to suggest a very tight labor market, though the recent upward trend is a concern. The Russian invasion of Ukraine, renewed lockdowns in China, and a new Fed tightening cycle are likely to continue distorting the global economy over coming months.
The number of ongoing claims for state unemployment programs totaled 1.254 million for the week ending May 21, a drop of 33,480 from the prior week (see second chart). State continuing claims have declined in 16 of the past 19 weeks and have been below their pre-pandemic level of 2.111 million since October 2021 (see second chart).
The latest results for the combined Federal and state programs put the total number of people claiming benefits in all unemployment programs at 1.284 million for the week ended May 21, a decrease of 35,619 from the prior week. The latest result is the 15th week in a row below 2 million.
Initial claims remain at an extremely low level by historical comparison, but recent weeks have seen an upward trend become more apparent. The trend may be temporary or may be an early warning sign. The overall low level of claims combined with the record-high number of open jobs suggest the labor market remains very tight. The tight labor market remains one of the strongest parts of the economy, providing support for consumer spending. However, persistent price increases are starting to work against consumer attitudes.
Continuing labor shortages and turnover, along with materials shortages and logistical issues, are likely to continue to hamper the growth in production across the economy and sustain upward pressure on prices. In addition, the Russian invasion of Ukraine, renewed lockdowns in China, and the start of a new Fed tightening cycle will continue to weigh on global economic activity. The outlook remains highly uncertain.
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