a Clear Sign that Layoffs are Happening at a Growing Number of Companies

Initial claims for unemployment insurance fell by 5,000 to 256,000 in the week ending July 23 from an upward revised 261,000 in the week ending July 16. The four-week moving average of initial claims, which smooths out some of the volatility, moved up 5,000 to 249,000 in the week ending July 23. It hit a low of 172K in the early April. The insured unemployment rate held steady at a very low 1.0% in the week ending July 16.

The total number of people receiving benefits under regular state unemployment insurance programs (continuing claims) fell by 25,000 to 1.359 million in the week ending July 16, reversing only half of the previous week’s 51,000 rise. The four-week moving average of continuing claims rose by 9,000 to 1.362 million. Continuing claims have crept higher in the past eight weeks but are still close to decades-long lows as unemployed workers leave the program’s rolls, either because their benefits have expired or because they have quickly found a new job.

The labor market remains in good shape as the summer quarter begins but the rise in initial claims since early April is a cold breeze blowing at the hot labor market this summer. The recent rise in the 4-week moving average of initial claims to 249K in the week ending July 23 from a low of 172K in early-April is a clear sign that layoffs are happening at a growing number of companies and the unemployment rate is close to a low at 3.6%.

Based partly on the persistent rise in U claims over the past four months, we expect the July employment report (released on August 5) will show payroll job growth of 200K-250K, the smallest rise since April 2021. Payroll job gains in August and September are likely to be even lower than in July. The July unemployment rate will hold at 3.6% for the fifth straight month but should edge higher through year-end 2022.

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