Do the new unemployment claims numbers signal a coming recession?

American weekly unemployment claims have reached their highest levels since October 2021 according to new data from the U.S. Department of Labor and this rise in benefits applications could be an early indicator of future economic woes. 

According to the data from the Department of Labor, seasonally adjusted initial claims in the U.S. rose by 22,000 against the previous week's numbers and pushed the country’s total number of claims to 264,000. 

The United States hasn't seen unemployment benefit application numbers that high in over one-and-a-half years during a time when American businesses were dealing with the knock-on effects of the global Covid-19 pandemic. 

Bloomberg News’ Augusta Saraiva noted that the country’s unemployment application numbers can provide a good indicator of how difficult finding employment in America’s labor market can be after one loses their job. 

Saraiva also pointed out that recent unemployment claim numbers have been trending higher after layoffs in several of the country’s most important sectors have finally begun affecting business in every area of the economy. 

“Layoffs that began in white-collar sectors including technology and banking are increasingly starting to impact companies across the economy,” Saraiva wrote. 

“Looking ahead,” the Bloomberg journalist continued, “more job cuts could be on the horizon as a year’s worth of interest-rate increases by the Federal Reserve and tighter credit conditions continue to weigh on the economy.”

The four-week moving average of unemployment benefits claims is considered a better overall indicator of labor market conditions according to Reuters, which noted that this figure was also at the highest point it has been since November 2021. 

The Department of Labor pegged the country’s four-week moving average at 245,250 and it represented an increase of 6000 unemployment claims. But why should all of these numbers matter to you?

Essentially, unemployment application numbers coming out of the Labor Department support the theory that the United States is heading towards a recession later this year, which would drastically affect your life regardless of where you’re reading this article. 

"The Fed looks closer to winning the war on inflation today, but it risks losing the war on keeping the economy afloat and away from the shoals of recession," FWDBONDS chief Economist Christopher Rupkey told Reuters. 

Over the last fourteen months, the Federal Reserve has raised America’s interest rates ten times in order to bring about a cooling in the job market and guide the country’s economy into a more stable position according to the Associated Press (AP).

“The Fed is hoping to achieve a soft landing low, lowering growth just enough to bring inflation under control without causing a recession. Economists are skeptical, with many expecting the U.S. to enter a recession later this year,” wrote the AP’s Matt Ott.”

In April, the non-profit economic research group The Conference Board noted that there was a 99% likelihood that the U.S. economy would suffer a recession within the next 12 months with their predictive model suggesting the downturn will start in mid-2023. 

That timeline could be accelerated if the looming federal debt crisis isn’t solved before the government reaches the debt ceiling, a problem that seems ever more likely with positions among the House Republicans and Biden administration stiffening. 

However, there is some good news. Famed American economist Paul Krugman isn’t so sold on the idea of a coming U.S. recession and he tweeted on May 10th that the Department of Labor’s new data was actually good news for the economy. 

“The good news is that so far it seems as if we've been getting significant labor market cooling without a rise in unemployment," Krugman wrote. “Soft landing hopes are still very much alive,” he added, suggesting that there wouldn’t be a recession in America.