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Jobless claims in July continue rising layoffs trend

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New filings for jobless benefits continued to beat market estimates to the upside, falling 1.9% to 256,000 for the week ending July 23. Given that the labor market is the main force keeping the economy from descending toward an economic trough, the initial jobless claims data released Thursday add important context to the second-quarter GDP figures that showed economic contraction for the second consecutive quarter, down 0.9%. 

While we don’t think the economy was in a recession in the first six months of the year, the trend looks ugly enough in July that we cannot rule out the possibility of the economy entering a recession as early as the third quarter of 2022—if, and only if, the trend continues.  

A chart shows jobless claim levels through July 23

The July decline in new filings for jobless benefits was due to a markedly upward revision in the prior week’s filings from 251,000 to 261,000. Overall, new claims have risen significantly in the last three months as layoffs gain momentum, especially in the technology and housing sectors, which are some of the most rate-sensitive sectors.  

Our preferred measure—the 13-week moving average—reached above the pre-pandemic level of 218,000 for the second week in a row.  

It is interesting that although the economy has added more than 200,000 new jobless claims every week since April, the number of continuing claims has remained flat since May. Continuing claims were down 1.8% for the week ending July 16.  

A chart shows U.S. weekly continuing claims from Dec. 2019 through July 23, 2022

That suggests labor demand continues to be strong enough that workers filing for unemployment benefits do not stay unemployed for too long. Due to excess job openings, they can find new jobs relatively quickly.  

We expect the rise in initial jobless claims will continue as the economy continues to slow down, but it will be at a more gradual pace than what happened at the onset of the pandemic because of such strong labor demand. A sharp spike in new claims—a proxy for layoffs—won’t appear until all the signs of a recession align and the impact of Fed’s rate hikes is felt by the real economy, which might take several months to play out.  

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About Tuan Nguyen

@tuannguyen0709

Tuan Nguyen is an economist at RSM US LLP who analyzes high-frequency economic data within the United States and global economies to better understand the American middle market. Tuan’s data-driven economic analysis and insights enhance the ability of middle market companies to thrive in an increasingly competitive global economy. In December 2023, Nguyen and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Based in New York, Tuan works closely with the firm’s cutting-edge Industry Eminence Program to help senior analysts accelerate data-driven strategies in their line of business. His areas of focus include the comprehensive measurement framework for environmental, social and governance (ESG) financial reporting, as well as trends in behavioral, labor and network economics and in industrial organizations. Before joining RSM, he was a graduate researcher, lecturer and teaching assistant for the economics department of his alma mater, Northeastern University, where he taught macroeconomics, international economics and microeconomic theory.

Nguyen holds a Ph.D. in econometrics and quantitative economics from Northeastern University and holds a bachelor of arts in economics and international affairs from the University of New Hampshire, where he graduated summa cum laude and was recognized as an outstanding economics student.

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