Region's unemployment rate increased slightly in August

Too early to tell if the statistics are pointing to an economic downturn

The big news this month is that the Inland Empire’s unemployment rate ticked up slightly from July’s reading of 3.9%, to 4.3% in August. While these are non-seasonally adjusted statistics, the fact that the unemployment rate doesn’t usually increase between July and August during expansionary periods (in past years, even before the pandemic, it would either stay constant or decline slightly between these two months) suggests that this month’s increase might be an early sign of weakening labor market conditions.

Other metro areas (Los Angeles, San Diego) either saw no change or a slight increase in their unemployment rates in August.

These statistics arrive even as August’s establishment survey showed solid job growth, especially in the Inland Empire. So, the increase in the unemployment rate is somewhat confusing and might not be telling the full story.

To try to obtain that full story, I’ve also checked on the other concurrent indicators I follow. The four-week average of new unemployment insurance claims are down in San Bernardino and Riveriside Counties by 2.2% week-over-week in mid-September, and are certainly down month-over month from July to August. See the chart below. Other indicators also point to strength rather than weakness.

Overall, there are still no definite signs of a recession, but with another rate hike announced by the FOMC last week (75 basis points, or 0.75 percentage point increase in the target federal funds rate), it might only be a matter of time before the rest of the economy feels the effects of the ongoing monetary tightening.