May 9, 2024

Initial unemployment claims rose 22 thousand in the week ending May 4 after rising 1 thousand the previous week.   The increase this week seems related to the NYC teachers who had a break and were allowed to apply for unemployment benefits.   If so, the increase is likely to prove to be temporary.  The economy is strong enough and likely to remain so for the foreseeable future.

The number of people receiving unemployment benefits rose 17 thousand in the week ending April 27 to 1,785 thousand after falling 6 thousand in the previous week. This series has been essentially unchanged for the past year.

Given little change in the number of people receiving unemployment benefits,  the insured unemployment rate was unchanged in the most recent week at 1.2% after having been unchanged in the previous week  Before the shutdown started in 2020 it was at 1.2% so it is essentially still at its pre-pandemic level.   When the labor market begins to shift gears, this rate will start to rise.  Thus far, this has not  happened.

The insured unemployment rate tracks closely  the unemployment rate.   Given the level of  the insured unemployment rate we expect the unemployment rate to be unchanged in May at 3.9%.  We also expect payroll employment to increase 220 thousand.

Inflation has peaked and is slowing gradually.  As a result we believe that the Fed will leave the funds rate at its current level of 5.5% for a while  .  That means that short-term real interest rates are 1.7% (5.5%- 3.8% inflation) which might finally produce slower growth.  After climbing 1.6% in the first quarter we expect GDP to rise roughly 3.0% in the second second quarter.  .

Stephen Slifer


Charleston, SC