• Initial claims for unemployment insurance in the week ending July 22 fell by 7,000 to 221,000, the lowest level since late-February.
• The four-week moving average of initial claims fell to 234,0000, the lowest level since late-May.
• Continuing claims fell sharply by 59,000 to 1.690 million in the week ending July 15.
• The labor market remains very strong but will deteriorate later this year in part because of higher interest rates.

Initial claims for unemployment insurance fell by 7,000 to 221,000 in the week ending July 22, a third straight weekly decline and the lowest since late-February. The four-week moving average of initial claims, which smooths out some of the volatility, was down by 4,000 to 234,000, reversing the rise in June. Continuing claims fell sharply by 59,000 to 1.690 million in the week ending July 15 and the four-week moving average of continuing claims was down by 11,000 to 1.720 million, its lowest level since mid-February. The insured unemployment rate edged down to 1.1% in the week ending July 15, its lowest level since mid-January.

Initial claims for unemployment insurance moved gradually higher through mid-June 2023 to about 255K; they started the year at around 200,000, a very low number. But in the past five weeks, they moved back down reversing more than half of that increase, and are quite low on a historical basis. Continuing claims have declined over the past three months since peaking in mid-April at 1.83 million, suggesting that those who lose their jobs are quickly finding new ones.

Payroll job growth remains strong this year, with the U.S. economy adding more than 250,000 jobs per month, on average, through June 2023, well above the long-run trend. The unemployment rate was 3.6% in June, remaining close to a more than 50-year low in April of 3.4 percent.

PNC expects a shallow recession to start in late 2023 or early 2024 as the impact of higher interest rates continues to work its way through the economy. Also, the resumption of student loan principal and interest rate payments starting in October (estimated between an average of $350-$400 per month) for close to 27 million borrowers and the cancellation by the SCOTUS of Biden’s $20K debt cancellation are both moderate negatives for consumer spending in the final holiday quarter of this year and in 2024. That is built into our forecast for a shallow recession.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance, and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.