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PNC Senior Economic Advisor Stuart Hoffman: Initial Claims for Unemployment Insurance Fell in Early January 2023

Michigan Business Network
January 13, 2023 1:00 PM

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to Their Lowest Level Since Mid-October 2022

  • Initial claims for unemployment insurance fell by 1,000 in the week ending January 7, 2023, to 205,000. The four-week moving average fell by 2,000 to 213,000.
  • Continuing claims plunged by 63,000 to 1.634 million in the week ending December 31, 2022.
  • PNC’s baseline forecast is for a mild recession starting in the spring of 2023.

Initial claims for unemployment insurance fell by 1,000 to 205,000 in the week ending January 7, 2023, from an upward-revised 206,000 (was 204,000) in the previous week. The four-week moving average of claims for the week ending January 7, 2023, which smooths out some of the volatility in weekly claims especially during holiday times, was 213,000 down 2,000 from the previous week’s unrevised 414,000. The four-week moving average is back down to its lowest level since mid-October.

Continuing claims plunged by 63,000 to 1.634 million in the week ending December 31, 2022, from an upward-revised 1.697 million (was 1.694 million) the previous week. The four-week moving average of continuing claims for the week ending December 31, 2022, was 1.680 million, down 9,000 from the previous week. Continuing claims have increased somewhat in recent weeks but still remain near their lowest level in more than 50 years. With the job market very strong, laid-off workers are getting quickly rehired. The insured unemployment rate dipped to 1.1% in the week ending December 31, 2022.  

Federal Reserve officials are expecting a slowing in the job market given the big increase in interest rates last year; the hope is that this will bring down inflation that is well above the central bank’s 2% objective. But the labor market remains very strong. Although job growth has slowed over the course of 2022, it remains well above its pre-pandemic pace, and the labor market is extremely tight. The Fed would welcome a more substantial slowing in job growth. Right now the labor market is too tight for the Fed, and job growth is too strong, with average monthly gains of 247,000 payroll jobs in the three months through December 2022.

Given continued strength in the labor market and inflation running well above the FOMC’s 2% target, the Federal Open Market Committee raised the federal funds rate by 50 basis points to a range of 4.25% to 4.50% at their December 2022 meeting and repeated that “ongoing increases will be appropriate” signally more rate hikes are coming in the first quarter of 2023. We expect a 25 bps funds rate hike at both the February 1 and March 14 FOMC meetings, bringing the funds rate target up to a “terminal” 4.75-5.00%.

We expect the FOMC will hold the funds rate steady until December 2023 when the first of many rate cuts will start. Given the big increases in both short-term and long-term interest rates in 2022, with the fed funds rate expected to move higher in the first quarter of this year, PNC expects the U.S. economy to experience a mild recession in 2023, with a modest increase in the unemployment rate to near 5.5 percent. 

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

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Michigan Business Network is an online broadcasting company that provides knowledge, news, and insights into Michigan’s businesses, industries, and economy.