Up 21,000 versus the Week Prior

• Initial claims for unemployment insurance increased by 21,000 to 211,000 in the week ending March 4^th
• The four-week moving average of initial claims was up by 4,000 to 197,000
• Continuing claims increased by 69,000 to 1,718,000 in the week ending February 25^th
• Both initial and continuing claims remain low by historical standards but face headwinds in maintaining that standing

Initial claims for unemployment insurance (UI) increased by 21,000 to 211,000 for the week ending March 4^th. This is up from an unrevised 190,000 in the previous week. This is the first significant move up for initial UI claims this year. Layoff announcements across industries – but especially concentrated in tech – typically take time to go into effect after initial news breaks. As such, the move up in UI claims to start the month of March fits the narrative that has been running since the start of 2023. This rise is not, therefore, necessarily indicative of further deterioration in labor markets beyond the headlines that have already been written.

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 the Federal Reserve set on raising rates further through at least mid-2023, businesses may turn more cautious in their hiring practices. Any new layoffs in the weeks to come would more directly translate into higher UI claims. 

The four-week moving average of claims, which smooths out some of the weekly volatility, edged up by 4,000 to 197,000 in the week ending March 4^th. Despite a break this break in the recent consistent downward trend, the four-week moving average remains among the lowest the observed values since the data began in the late 1960s. A reversal in this smoothed metric will be necessary before markets can be confident in a reversal in the U.S. labor market’s exceptionally tight conditions.

Continuing claims for unemployment insurance increased significantly to close out the month of February, rising 69,000 to 1.718 million in the week ending February 25^th. The four-week moving average of continuing claims also rose, gaining 9,500 to 1.6795 million. Although hiring in the U.S. economy remains strong, there appears to be the potential for more slack in hiring trends set for the coming months.

This is not to say that economic conditions are set to collapse entirely. Rather, any newly laid-off workers are not as likely to be so quickly rehired as businesses assess their plans to weather what will at least be an economic slowdown into the second half of this year. Inflation pressures reared up again to open the year and concerns that oil prices may rise as China’s economy continues to re-open from its “Zero COVID” policies should have businesses treading lightly regarding taking on new costs. Any workers who suffer a job loss in the coming months will be more likely to need UI benefits than those who have dealt with layoffs thus far but have also had the advantage of businesses’ still insatiable appetite for hiring thus far.

February 2023 hiring results will be released this Friday, March 10^th. Although there are reasons to think that the January jobs report may have overstated the strength in the labor market, there is no question but that the job market is very strong. Another unexpectedly strong employment report for February will keep pressure on the Federal Reserve to perhaps out-do market expectations for rate hikes over the next two meetings – out of which PNC expects two 25 basis point hikes. UI claims offer a higher frequency view of current labor market conditions, however, and if the current release’s uptick continues through the coming weeks, Bureau of Labor Statistics employment reports can be expected to follow suit and finally show the hiring slowdown that the Federal Reserve seems to consider requisite before they take their foot off of the gas in terms of monetary policy tightening.