The weekly release of initial jobless claims returns on Thursday morning amid signs that the weekly figure might be stabilizing for a protracted run through a range in the mid 240k’s over the next few weeks.
In the week ending July 22, the figure for seasonally adjusted initial claims was 244,000, an increase of 10,000 from the previous week’s level. The previous week’s level was revised up by 1,000 from 233,000 to 234,000. The 4-week moving average was 244,000, unchanged from the previous week’s revised average. The previous week’s average was revised up by 250 from 243,750 to 244,000.
Heading into this week’s release, we have produced an identical four week moving average of 244k two weeks in a row, which also mirrors last week’s number. The 12-week moving average is now 242,800 and the 24-week moving average is 243,700.
Last week was the 125th straight week that claims remained below 300,000, a threshold associated with a robust labor market. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is near full employment, with the jobless rate at 4.4 percent.
The broader unemployment numbers also provide a backdrop indicating increasing strength. For 14 straight weeks, the total number of people receiving unemployment benefits, which is extended to folks for 26 weeks in most states, has run below the two million. This is the longest such streak since Richard Nixon was President and the economy was a third of its current size.
Our bias is for continued stability in the data through the low to mid 240k’s, with some risk to the topside. The level we reached two weeks ago at 234k could be considered a floor when viewed both historically and through the lens of the current environment. Based on that assumption, we are still relatively close to that historical bottom, leaving little to no margin for error for traders considering an economic event trade below the current four week moving average.
Another important consideration we are monitoring week to week is the year over year seasonal patterns to provide possible guidance for the glide path over the next few weeks. When looking at previous years we see stability through July and the late summer period in the four-week moving average, and we do not expect an uptick in volatility until we reach the fall time frame. The chart below is a year over year look at the weekly moving average with our current window highlighted.
An econometric model tuned to historical patterns and volatility as well as current conditions provides possible guidance towards a level of 242,000 and holding steady there for the next weeks.