Higher new UI claims in May are further sign of labor market weakness
Loyal readers of this newsletter will know that I am closely watching regional new unemployment insurance (UI) claims data for any signs of labor market weakness. I continue to believe that we could be heading for a mild recession this year, but the outlook remains uncertain, even after months of poor job growth statistics. For example, in my evaluation of the new UI claims data for April 2023, I noted that there was a relative decline in average new UI claims in April, a fact that I used to predict that the metro area’s unemployment rate may decrease that month (indeed, that is what happened). In other words, there were few signs of a recession in the April data.
In a roller coaster story (more like a “kiddie roller coaster”, I suppose), May 2023’s unemployment rate is on track to be the same or slightly higher than April’s. While we don’t have this last week of May’s data, based on the first four weeks of May, new UI claims were 2.4% higher in San Bernardino County but 0.7% lower in Riverside County, compared to April. Combine the two, and that’s a slight increase in total unemployment due to layoffs (which is really what the new UI claims data are tracking), which could mean a higher unemployment rate in May 2023.
This prediction is particularly significant because the unemployment rate doesn’t usually increase between April and May. In previous years, it has declined from anywhere between 0.1 to 0.5 percentage points between these two months. So, an increase in May – which we can’t be sure of for several more weeks, when the BLS releases its data – would be another sign of weakness.