I’ve been monitoring initial jobless claims closely for the past several months, to see if there are any signs of stress. This is because the long leading indicators were negative one year ago, and many – but not a majority – of the short leading indicators have recently turned negative as well. So I have been on “recession watch.” But no recession is going to begin unless and until layoffs increase.
To reiterate, my two thresholds are:
1. If the four week average on claims is more than 10% above its expansion low.
2. If the YoY% change in the monthly average turns higher.
As of this week, initial claims continue to be very close to their expansion lows. The 4 week moving average of claims Is 212,000, only 11,000, or 5.2%, above the lowest reading of this expansion:
On a YoY% change basis, the 4 week average is only 0.7% higher than one year ago (which itself was one of the lowest readings of the entire expansion):
But September claims so far are running -2,333, or -1.1% less than the full month of September 2018:
The less volatile 4 week average of continuing claims is also running -1.5% below where it was a year ago:
There is simply no sign whatsoever of any stress in the jobs market that we could expect to see in the immediate months preceding a recession. The recession risk for Q4 of this year is rapidly receding.