The numbers: The number of Americans applying for jobless benefits has topped 200,000 for nine weeks in a row and looks worse than previously reported, based on a change in how the government adjusts for seasonal swings in employment.
The newly revised data suggest the labor market has softened more than it had appeared.
In the seven days ending April 1, new jobless claims totaled 228,000.
That’s down from a revised 246,000 in the prior week. However, two weeks ago, the government had estimated just 198,000 new claims for that week.
The large 48,000 upward revision for the week of March 25 is one of many such instances in the jobless-claims data going back several years.
Changes to the formula for seasonal adjustments now show jobless claims to be significantly higher early in 2023 than previously reported. That might reflect a flurry of corporate layoffs that had not shown up in the data before.
The number of people applying for unemployment benefits is one of the best barometers of whether the economy is getting better or worse. While new unemployment filings are still quite low, they’ve shown a marked increase in the past two months.
The changes in the jobless-claims formula do not affect the monthly employment report that comes out Friday. The government uses a different process to adjust those figures, and that has already been updated.
Key details: The Bureau of Labor Statistics changed how it adjusts jobless claims for seasonal swings after the pandemic because of the large distortions that caused.
Now the government has adopted a somewhat different process to try to make the adjustments more accurate. As a result, many claims reports over the past several past years have been heavily revised.
“In my nearly 30 years of tracking these unemployment insurance data, I can never remember an annual seasonal factor revision like this,” said Stephen Stanley, chief economist of Santander U.S. Capital Markets.
Read the government’s explanation.
What the new revisions show is that jobless claims bottomed out last fall at a 53-year low of 182,000 and remained around 200,000 until February, when they began to creep higher.
Raw or unadjusted jobless claims, for their part, still show new unemployment filings at extremely low levels. Some 207,000 people were reported to have filed applications for benefits last week, before seasonal adjustments raised the number to 228,000.
“This week’s initial unemployment claims data is not another crack in the labor market,” contended corporate economist Robert Frick of Navy Federal Credit Union.
The number of people collecting unemployment benefits across the country, meanwhile, rose by 6,000 to 1.82 million in the week ending March 25. That’s the highest level since the end of 2021.
Big picture: Wall Street is watching jobless benefits closely because it’s one of the first indicators to emit warning signs when the U.S. is headed toward recession.
The low but rising level of claims suggests the economy might be getting closer to the danger zone. Rising interest rates, high inflation and more stress on the U.S. financial system threaten to undermine growth and spawn more layoffs.
Looking ahead: “The changes to the initial jobless claims’ seasonal factors changes the recent narrative and makes the case that the U.S. labor market has been weakening since the beginning of February of this year,” said chief economist Eugenio Aleman of Raymond James.
“Although this narrative is not good for the U.S. economy and for the labor market, it is good news for the Federal Reserve,” he said. The Fed might not have to raise interest rates much higher, he said, if the labor market continues to soften.
Market reaction: The Dow Jones Industrial Average DJIA,
