US jobless claims, unemployment data: Is a recession likely?

Wall Street is getting mixed signals from the labor market as the unemployment rate signals a recession while initial jobless claims suggest the contrary. Market Domination co-host Julie Hyman breaks down the historical comparisons between recessions and these data points, and what it could signal about the future of the US economy.

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This post was written by Melanie Riehl

Video Transcript

The unemployment rate might be signaling a recession but jobless claims are not finances.

Julie Hyman joins me now with a closer look.

Well, at least that's according to one strategist as we talked about earlier, Josh, this week, we don't have a lot of economic data.

So this morning, the jobless claims took on some new importance as investors are trying to figure out what's going to happen next in the stock market and other risk markets and what's going to happen with us economy.

Well, Kevin Gordon, senior strategist over at Charles Schwab tweeted this chart earlier today.

Now, first of all, what we're looking at here is the unemployment rate minus the three year moving average.

And as you see, it actually is creeping up to an area that is consistent with past recessions, the 2020 recession, the financial crisis, and then you go back further.

But he points out if you look at jobless claims and look at the four week average of initial jobless claims the year over year percentage change, which is this axis here, you see that we're not seeing a spike there that would be consistent with past recessions.

It's more sort of in line with norms here.

We haven't yet seen that pick up.

And of course, as we discussed also, the jobs figure this morning was somewhat reassuring to markets as it happens.

Kevin was on the morning show today and he talked a little bit about why he is not convinced that a recession is coming.

Um, you know, a lot of these trends have been in place for a while, whether it's a slow down in wage growth or whether it's this drift higher and the unemployment rate or even just the monthly change in payrolls, which has been decelerating.

Um I think probably the miss in expectations for payroll is coupled with, you know, that, that two, that 20 basis point jump in the unemployment rate was probably where a lot of the fear started to kick in.

But even if you look at some of the innards of the unemployment rate itself triggering the so rule, yes, a bad thing.

But if you start to look at things like the employment to population ratio, even for the prime age group, it's still rising, there's still a lot of inflows into the labor force and it's expanding.

So those things are not yet consistent with what you would typically see at the beginning of a recession or the economy already being in a recession.

So another view here, Josh, looking specifically through the prism of the labor numbers at what's kind of seems to be coalescing into consensus here among the people we've talked to that there is an economic slowdown but it doesn't yet look like a recession.

At least that seems to be the majority view.

All right.

Thank you, Julie.