Initial claims for regular state unemployment insurance rose 27,000 in the week ended June 4, reaching 229,000, the highest level since January 15 (see first chart). However, in the last 20 weeks, 13 claims have declined but declined, averaging -11,000, smaller than the seven increments that averaged 18,000. By long-term historical comparisons, initial claims remain extremely low.
The four-week average has risen for the eighth time in nine weeks, coming in at 215,000, up 8,000 from the previous week and the highest since March 12. Weekly initial demand data suggests a very tough labor market, although the recent upward trend is a concern. The Russian invasion of Ukraine, the renewed lockdown in China and a new Fed tightening cycle could derail the world economy for months to come.
The number of ongoing claims for the state unemployment program was 1.254 million in the week ended May 21, down from 33,480 in the previous week (see chart 2). State claims have dropped to 16 in the last 19 weeks and are below their pre-epidemic level of 2.111 million since October 2021 (see chart 2).
The latest results from the combined federal and state programs put the total number of people seeking benefits in all unemployment programs for the week ended May 21 at 1.284 million, down 35,619 from the previous week. The latest result is below 2 million in the 15th week.
Early claims have remained extremely low by historical comparisons, but an upward trend has become more apparent in recent weeks. The trend may be temporary or may be an early warning sign Overall low-level demands combined with record-high number of open jobs suggest that the labor market remains very tight. The tight labor market is one of the strongest parts of the economy, providing support for consumer spending. However, the steady rise in prices has begun to work against consumer sentiment.
Constant labor shortages and turnover, along with material shortages and logistical problems, can hamper productivity growth in the economy as a whole and maintain upward pressure on prices. Also, Russia’s aggression in Ukraine, a new lockdown in China, and the start of a new Fed tightening cycle will continue to weigh on global economic activity. The outlook remains highly uncertain.