Initial Weekly Unemployment Claims Recession Warning

Mish

Will initial unemployment claims provide a recession warning? If so, how long?

Calculated Risk puts out a nice chart of Initial Recession Claims every month.

The text anecdotes in blue are mine, as are the boxes.

I like the chart, not for what it says, but for what is doesn't say.

Will we have a recession warning or not?

My guess is no.

Mike "Mish" Shedlock

Comments (21)
No. 1-16
numike
numike

“The first shots are being fired in a new trans-Atlantic front of the U.S. global trade fight. The Trump administration plans to roll out tariffs on $7.5 billion of imports from the European Union on Oct. 18… after the World Trade Organization said the U.S. is entitled to impose levies in response to the bloc’s subsidies to Airbus SE” [Wall Street Journal]. “The decision marks the WTO’s biggest arbitration award and raises the potential for retaliatory actions by the trade partners that go beyond rival plane makers Airbus and Boeing Co. The new levies will include commercial aircraft as well as agricultural and industrial goods. That’s likely to lead to bigger volleys between the trading partners.”

Harry-Ireland
Harry-Ireland

Mirror, mirror on the wall Punch me in the face and kick me in the ball Will we have a recession, or can we have it all?

Harry-Ireland
Harry-Ireland

By the way, that graph is spectacular.

lol
lol

Nothing short of MMT will save (Trump)the economy haha!Obama racked up close to 10 tril in 8 years,Trump in 4 will rack up7-8....and yet we'll see fewer people working than since Bonanza was at the top of the ratings.

stillCJ
stillCJ

Editor

I think the striking GM workers can file for unemployment, which it seems to me is not really unemployment. I expect that is just mixed into the whole unemployment filings number.

jasonbroomer
jasonbroomer

Mish, bear in mind the expansion in the labour force over the last 20-30 years. 200k initial claims today is a relatively small proportion of the overall number in comparison to the past.

Bronco
Bronco

"My guess is no."

...

Agree. The fat was cut during last recession. Recovery / expansion past 10 years weak and uneven never allowing fat to build. When (not if) the job losses show up it will be a signal conditions are poor NOW.

Matt3
Matt3

An uptick in unemployment claims from a historic low is not the same as prior upticks. Also, labor force is much bigger and chart isn't adjusted for this. Just another chicken little story for the doom and gloom crowd. Enjoy your life and have a nice weekend.

Country Bob
Country Bob

UNEMPLOYMENT claims are near the lowest level they have been since 1971, and somehow that is a bad thing? We want more people to file for unemployment benefits?

Even assuming there was a recent uptick in claims, the scale on the graph tells us that whatever uptick is not meaningful.

The graph tells me that employers are having trouble filling positions, and are accepting more marginal candidates --- something I have observed and commented about at my company.

Nothing in this graph says recession. I assume something on it is mislabeled, or else the blog post title is wrong

Realist
Realist

Hi Country Bob. Though I don’t agree with Mish that a recession is imminent, I can see why he posted that graph. He looks at the previous pattern of a recession occurring after a long and steady drop in unemployment and expects the same to happen now.

I personally expect continued slow growth for several more years provided there is no shock to the system. The most likely shock would be for Trump to rapidly expand his trade wars with all of America’s trading partners.

MickLinux
MickLinux

I think Mish's point was that unemployment is not a reliable leading indicator of recession. That's all.

KidHorn
KidHorn

I see 2 things. The present drop is insanely long in the tooth compared to previous cycles and things can rapidly spiral out of control.

I have no idea if and when we'll have our next recession from looking at the graph.

Casual_Observer
Casual_Observer

Trump could have run on the merits of the economy and improvements to economic measures. Instead he felt the need to ask countries to dig up dirt on a potential political opponent as far back as 2017. The fact that he could even lose 2020 election shouldn't be a question. If you look at other sitting presidents with similar numbers on unemployment they all won in landslides. Trump has only himself to blame if he loses because his message is always about the opponent. The guy literally finds ways to fail himself at every turn.

Greenmountain
Greenmountain

There is also the issue of labor supply. Like immigration or not, immigration increased labor supply over the last 15 years and now that supply is dwindling due to Trump's policies. US population growth is stagnating - not like the rest of the world but not growing as it has in past generations and baby boomers leaving the workforce every day. These factors are a major factor in low unemployment and more critically that businesses can not find employees. Overtime that will slow economic growth.

Realist
Realist

Completely agree with you Greenmountain. I have been saying the the same thing for years. A lack of skilled labour slows economic growth slightly.

There are more jobs sitting empty than there are unemployed workers. The unemployed can’t fill those empty jobs because they don’t have the necessary skills or abilities.

Obviously the ideal solution is to train Americans to fill those empty jobs. However, that takes time and money, and businesses need to fill those jobs asap.

Another solution is to bring in skilled labour from other countries. Current policies seem to be aimed at reducing the immigration of skilled labour.

Some businesses attempt to poach workers from other businesses by offering higher wages or other perks. Not all businesses can afford to do this due to competitive pressures.

Some businesses attempt to make up for worker shortages using technology and automation, but not businesses are easily automated.

And some businesses resort to offshoring some of their business when they simply can’t get it done in the US.

Part of the problem is the large number of retiring baby-boomers. The number of Americans aged 65+ was 8% in 1950. Today it is 17%. By 2030 it will be 21%. Add in the 24% of Americans under 19, and soon the US will have only 55% of the population between 18 and 65.Though there will always be some workers under 19 and over 65, the shortage of workers, and especially skilled workers, is only going to get worse.

Without immigration of skilled labour, businesses will not be able to expand without the use of more automation, or more offshoring.

Casual_Observer
Casual_Observer

I still see U-5 and U-6 higher. Unemployment numbers have been jobbed over the last few decades to make it look like it is lower than it actually is. I still think the effects of the great recession understate U-2.


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