Jobless claims last week rose back up to 242,000 after a brief one-week drop, the Labor Department reported on Thursday.
The increase underscored the upward trend in new filings for jobless benefits as the labor market continued to soften. New claims have remained consistently above the pre-pandemic level for more than two months.
At the current pace, it would take the initial claims number about six to eight more months to reach the 350,000 threshold level that we believe would signal a downturn.
But there is a significant risk that layoffs will rise quickly because of the nonlinear nature of recessions. We recently raised our recession probability to 75% over the next 12 months.
A recession might come earlier in the third quarter, an outcome more in line with our recession forecast.
Inside the data, some of the increase was driven by another spike in new claims from Massachusetts, up by more than 3,700 for the week ending April 28 on a nonseasonally adjusted basis. Massachusetts also recorded a near-10,000 increase in jobless claims the week prior.
Continuing claims fell to 1.8 million from 1.84 million for the week ending April 21. Still, that was most likely a one-time drop. We should expect continuing claims to pick up as the labor market slows.
