KY ranks 2nd in US for largest jumps in unemployment. A UK economist explains the numbers
More Americans are applying for unemployment benefits – so much so that last week’s figures rose to the highest level they’ve been since mid-November, signaling what might amount to an economic slowdown as a tight labor market for employers wanes.
In Kentucky for the week ending July 9, the state actually numbered among the top five with the largest increases in new unemployment claims, ranking second just behind New York.
These are among the key takeaways from new data released by the U.S. Department of Labor Thursday for the week ending July 16.
So what does all this mean, if anything, for the possibility of a recession within the next year or so, especially given the Federal Reserve’s recent move to tighten credit?
We posed this question to the University of Kentucky’s Dr. Michael Clark, an economist and associate professor who directs the university’s Center for Business and Economic Research.
What does the data say?
For the week ending July 16, the figure for seasonally adjusted initial unemployment insurance claims in the U.S. totaled 251,000. That’s an increase of 7,000 from the previous week’s unrevised total of 244,000.
For context here, “initial” refers to an individual applying for unemployment benefits for the first time after a job loss. This contrasts with “insured” claims, which represent existing and ongoing support offered by state governments.
As pointed out by multiple news reports Thursday, this brings filings for unemployment insurance to their highest weekly levels since Nov. 13, 2021.
It also provides a clue that the red-hot jobs market on fire last year is beginning to cool.
Kentucky ranks among top 5 states for new jobless claims
The release from the Department of Labor also points out that Kentucky is among the top five states that saw the largest increases in initial claims for unemployment for the week ending July 9.
Kentucky fell behind one other state in that category: New York.
Here’s a look at each of those states and how many new unemployment claims they saw for the week ending July 9:
New York (+10,051)
Kentucky (+3,061)
Arizona (+2,447)
Ohio (+2,274)
Indiana (+2,234)
What does this mean for the state of the economy?
Although Clark and other economists call the count of initial unemployment claims a “leading indicator” – a measure that reliably signals emerging economic conditions and trends – Clark cautioned it’s not the only factor that should be considered.
For starters, while it’s true that unemployment insurance claims have been increasing, they don’t currently seem to be high in terms of the larger historical context, Clark said. He also noted there have been increases in unemployment insurance claims during previous economic expansions.
“We still have a very strong labor market,” Clark said, noting just last month, the U.S. economy added 372,000 jobs. “We still see a lot of job openings being advertised.”
That said, the U.S. also saw its gross domestic product shrink by an annual rate of 1.6% during the first quarter of 2022, and it could decline again during the second quarter, Clark noted.
There’s also the historic, 40-year high in inflation of 9.1%, along with the Federal Reserve’s response to that trend.
“Just how aggressive will the Federal Reserve be?” Clark asked, adding that its 0.75 percentage point increase to interest rates last month was a bit of a surprise. The Fed may choose to do that again, or go even higher, at its upcoming meeting later this month.
Going forward, Clark encouraged economic observers to look at the bigger picture, not just one indicator. Declines in monthly employment numbers, employers shedding payroll and easing back on hiring could be better signs when taken together.
Jobless claims, at least on their own, “may not be a real complete signal,” he said.
