Are US jobless claims telling us something?

For the past several weeks, jobless claims have arguably been distorted by seasonality and the extension of unemployment benefits from six to nine months. However, the numbers have risen well above the critical 400,000 mark. Are these numbers telling us something?

Last week I said that jobless claims comparisons to August last year remained worryingly high but that seasonal factors might be to blame. However, with claims now above 400,000 for the 7th week in a row, it is looking increasingly likely that the weekly claims numbers are pointing to a recessionary employment environment in the US.

U.S. jobless claims for the past week were up to 444,000 from 429,000 last week and have been as high as 457,000 a month ago ago. While seasonality was big part of the data in August, 4-week average jobless claims are now 112,750 above last year. This is well above the level that has led to recession in every business cycle since data began in 1967.

Meanwhile continuing claim rolls, averaging over 3.4 million the past 4 weeks, are over 800,000 above this time last year. The unemployment numbers are coming, so we should get a second good source of where the employment picture in the U.S. is headed.

Below are graphs of the last year of jobless claims and of the year-on-year comparisons for continuing claims.

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