New filings for unemployment benefits continued to climb last week, reaching 248,000 and for the second week in a row nearing our threshold of 250,000 that suggests risk of a recession.
But we don’t think it is cause for alarm, at least yet. For now, it is more likely that the rise in new claims is more seasonal noise than trend.
The increase came largely from California and Minnesota, the two states that have had spikes in new claims during the same summer period in the previous two years.
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Initial jobless claims overall have peaked around June and July the previous two years even though the data is seasonally adjusted.
But the labor market is much softer this year than in the previous two years, while hiring has slowed down materially because of trade uncertainty.
The mass layoffs of federal workers together with a less accommodating labor market conditions pushed continuing claims, or those workers who are still looking for work, to 1.956 million last week, the highest level since November 2021.
If continuing claims continue to rise, it will be time to worry more about the labor market.
