Beginning with the Unemployment Insurance (UI) Weekly Claims News Release issued today, April 6, 2023, the methodology used to seasonally adjust the national initial claims and continued claims reflects a change in the estimation of the models. This resulted in a significant upward adjustment to weekly initial and continuing unemployment claims for February and March 2023. Previous data showed that initial claims remained very low at just below 200K/week during those two months but the updated seasonally adjusted data show an average level of 218K/week for February and 242K/week for March. As a result, the number of individuals receiving unemployment insurance (continuing claims) in February and March was revised up to an average of 1.734 million (from 1.713 million) and 1.804 million (from 1.680 million), respectively.
This rise is more consistent with the large number of layoffs announced by high-profile tech and retail companies since the beginning of this year. This revised data is clear evidence that the labor market has become “less tight” in the first quarter of this year. This will be welcome news to the FOMC and could tilt them toward a decision to “pause” rate hikes at their May 3 meeting. The upward revision to initial and continuing claims for March suggested downside risk to our forecast of a 250K rise in payroll jobs in tomorrow’s employment report. Details of the revised claims data are as follows.
Initial claims for unemployment insurance (UI) fell by 18,000 to 228,000 in the week ending April 1 from 246,000 (revised up from 198,000) in the week ending March 25. The four-week moving average of claims, which smooths out some of the weekly volatility, edged down by 4,000 to 237,000 in the week ending April 1 from 242,000 (revised up from 198,000) in the previous week. Continuing claims for unemployment insurance rose by 6,000 to 1.823 million in the week ending March 25 from an upward-revised 1.817 million (was 1.689 million) in the week ending March 18. The four-week moving average of continuing claims rose by 11,000 to 1.804 million in the week ending March 25. The insured unemployment rate held steady at a low 1.3% (revised up from 1.2%) in the week ending March 25.
Layoff announcements across industries – but especially concentrated in tech – typically take time to go into effect after initial news breaks. One influence on initial UI claims in the coming weeks, however, could be saturation of businesses that have been quickly absorbing laid-off workers. With talk of deteriorating economic conditions and in the wake of the recent bank failures, businesses may turn more cautious in their hiring practices. Thus, any new layoffs in the months to come would more directly translate into a further rise in UI claims signally a slowdown in payroll job growth, and less upward pressure on worker compensation.
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