Unemployment Claims By State Look Recessionary

Authored by Simon White, Bloomberg macro strategist,

With soft-landing talk rife, it’s a good time to focus on the data still pointing to a recession beginning very soon. Stocks and bonds are not pricing an imminent or near-term recession.

One of these data points is the percentage of states whose unemployment claims are rising sharply on an annual basis. The chart below shows this percentage for this year (black line), and the median of this percentage over recessions back to 1990 (brown line).

As can be seen, the current path is consistent with a recession in the near future.

(We get a similar message if we exclude the extreme 2020 recession.)

The standard caveat applies that this is just one indicator, but its extra utility is that it measures what is going on at sub-national level, and captures the pervasive nature of recessions, in that they are widespread both by sector and geographically.

The indicator also captures the regime-shift nature of recessions, with economies moving abruptly from non-recessionary to recessionary states (everything looks fine … until it doesn’t).