Initial Jobless Claim Trends and Their Impact on the Economy

by Kristen Stephenson

As a research-driven economic development organization, Greater Phoenix Economic Council (GPEC) constantly monitors metrics and data to understand the changing landscape and health of our regional and national economies. In this blog series, Kristen Stephenson, GPEC’s Senior Vice President of Research & Analytics, takes a deep dive into how economic indicators work together to paint a picture of where the region is headed.

In October, GPEC launched its upgraded Economic Monitor featuring additional indicators. This month we are highlighting one of the new indicators, Initial Jobless Claims, and how it impacts the economy.

What are Initial Jobless Claims?

Initial jobless claims are a leading indicator in the overall economic picture, and one of the metrics showing the direction the economy is likely heading. This indicator is tracked by measuring the number of people who file unemployment benefits for the first time. The general rule of thumb is when initial claims exceed 400,000, it is a sign of a weakening economy. The Economic Monitor tracks the four-week moving average to minimize volatility in the measurement.

Initial claims are a separate measure than continuing claims which measure how long people are unemployed. The two metrics tend to be closely correlated, however, initial claims tend to be a better indicator of economic health than continuing claims, as analyzed in a recent article by the Federal Reserve Bank of St. Louis.

What are the current numbers telling us?

Nationally, unemployment claims were up for the week of January 31. Claims came in above forecast at 231,000; the forecasted rate was projected to be 212,000. This upward number may be in part due to the extreme cold snap that hit much of the country that week, causing a temporary spike in initial claims rather than a systemic shift in the economy. Looking at the four-week moving average, initial claims were 212,250, an increase of 6,000 claims from the previous period but down 5,500 from the same time a year ago. Except for the COVID induced recession, the four-week rolling average has generally fluctuated between 200,000 and 250,000 for the last decade, indicating that current numbers are in the normal range.

In terms of how this measurement impacts other indicators, the national economy appears to be in a “slow hire, slow fire” state, meaning not a lot of churn is happening in the job market. Employers are not robustly hiring, nor conducting layoffs big enough to impact this indicator – announcements of layoffs by a handful of large national employers are not dramatically skewing the numbers. Unemployment rates have been holding steady in the low 4% range, however, job creation numbers are weak. Much of this is due to economic uncertainty as employers navigate more immediate issues like changing tariff policy and long-term issues such as how the impact of artificial intelligence will impact employment needs.

Arizona initial claims have been fairly low over recent weeks. In the week ending January 24, initial claims registered at 2,531, down about 270 from the previous week. In fact, Arizona recently experienced its second lowest week of claims in the last thirty years, coming in at 1,528 during the week of December 27. However, much like the U.S., Arizona hiring has tempered in recent months. Employment is still growing with 6,500 new jobs month-over-month and 24,600 year-over-year, accounting for around 1% growth, but lower than the 2%+ rates seen in the COVID recovery. In other words, these are indicators to watch but not panic over.

Over the coming months, we’ll highlight key indicators, explaining what the current data says and what it means to the economy. To monitor economic conditions in real time along with me, visit gpec.org/monitor. We hope you find the Monitor a valuable tool in understanding the ever-changing economic landscape.

See the Economic Monitor