It says: “Not yet,” and “Quite a ways to go.” This trend has reversed before, but if it doesn’t and instead picks up momentum… Time to keep an eye on it.
By Wolf Richter for WOLF STREET.
When does a recession start? In the US, the National Bureau of Economic Research (NBER), which calls the official recessions in the US, has always defined recessions as broad economic downturns that include downturns in the labor market, such as declines in employment and significantly rising unemployment, neither of which have happened in this cycle.
My favorite recession indicator is the weekly data on the people who filed for unemployment insurance at least a week earlier and are still claiming unemployment insurance because they still haven’t found a job, what the Labor Department calls “Insured Unemployment.”
The black slanted line is the Recession Marker. The levels that entail a recession have risen over the decades as total employment has risen. This growth of employment over the decades causes the Recession Marker line to be slanted upward.
The current level of Insured Unemployment is still historically low, and far below the Recession Marker for this year of about 2.7 million.
The prior three business-cycle recessions – not counting the Pandemic which was a lockdown, not a business cycle recession – came after Insured Unemployment had surged to:
2.64 million in December 2008, beg. of Great Recession
2.56 million in March 2001, beg. of 2001 Recession
2.49 million in July 1990, beg. of 1990 Recession.
Today, the four-week moving average rose to 1.914 million, as the weekly total rose to 1.956 million, according to the Labor Department.
This shows that newly laid-off people – their numbers have been fairly low historically – are having a harder time finding a new job, than they did some months ago.
So it’s not that there is a big wave of job cutting, there isn’t, and employment overall continues to grow. But employers have slowed absorbing the people that have been laid off, and the number of people on Unemployment Insurance has been increasing at an accelerated pace and in early May started exceeding the mid-November level. The purple columns indicate recessions.
If this trend doesn’t reverse… While the level itself remains relatively low, and quite a bit below the recession marker (black line), the trend is going in the wrong direction at a now significant pace.
This trend has occurred before, and then it reversed before reaching anything near critical mass, and the economy kept plugging along just fine.
But if this trend persists, if it does not reverse, but just keeps heading higher toward critical mass, the indicator is going to ring a recession warning bell.
Not a “lagging indicator.” These weekly data for unemployment insurance benefits are the earliest indicators of systemic job losses. The data track the number of people receiving unemployment benefits after their initial claim.
A business-cycle recession starts in a specific month, as called out by the NBER. My favorite Recession Indicator gave advance notice of the beginning of the past business-cycle recessions, without having given false positives (indicating a recession when there was none).
The NBER identifies the start-date of a recession often months after the fact. So the NBER’s determination is lagging and backward-looking. But the start-date of the recession, as called out by the NBER, was indicated well ahead of time by this Recession Indicator.
It’s weekly data, released only a few days after the end of the reporting week, and is the most current. It’s not based on surveys. And it has not given false positives yet, unlike some others, including the yield curve and the Sahm Rule which registered recessions in a strong economy.
I use the four-week moving average (which the Labor Department also publishes) because the week-to-week data jump up and down as big states, when they miss the weekly deadline to process all their unemployment claims data and then submit it in the following week, cause the weekly figure to be low in one week and then high in the next. All states do that from time to time, but the big states move the needle. This kind of stuff has nothing to do with the labor market or unemployment and needs to be filtered out by averaging out the weekly data over four weeks.
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Thanks Wolf.
Is there a breakout by state and/or industry?
No need to post anything, a nudge in the right direction will do
This is about a US recession, not states or industries.
Yeah I know. I meant a breakdown of the jobless claims.
This is an interesting post. A year or so ago, every business had a help wanted sign at the front door. Car repair shops especially were constantly advertising for help. After reading this post, it occurred to me that the number of help wanted signs that I see while running about town has significantly decreased. I am in the eastern Tennessee Knoxville metro area. I wonder if others have observed similar changes in their locales?
Bruce!
Our man on the street! ;)
All of the help wanted signs have been replaced with “For Rent” signs
“My favorite recession indicator is the weekly data on the people who filed for unemployment insurance at least a week earlier and are still claiming unemployment insurance because they still haven’t found a job, what the Labor Department calls “Insured Unemployment.”
Mine too. Having to have suffered the humiliation of claiming the paltry support which the better off have decided, on moral justification, that is too much.
The seed corn that grew the America as a pest doesn’t sit right with me.
Agreed. There are still Help Wanted signs around Kansas City, but not nearly as many as two years ago.
Outstanding reminders, Wolf! For now, at least, we appear to be a good ways off from a recession. I would suspect that we’ll see another spike like early 2023, if a recession starts to move forward at a hastened pace.
Personally, I think there’s a good chance that once the recession arrives, job loses to AI will be a contributor to the timing of the recession, especially if it takes more than 18 months to arrive.
Well, all it needs is more fuel.
For instance, a rate cut that immediately frees up funds tied up in dodgy T’s available for investment. We aren’t even close to the edge where QE becomes the best alternative.
The Treasury could alter their issues to provide a short term support of the pretense that our beloved land is perfect just before the election.
etc.
Wolf, why not write it up and publish it in a decent journal? It might end up giving you more clicks. Maybe call it the “Wolf Street Recession Indicator”. Looks like we are pretty far from a recession based on your indicator.
BTW, any guess as to why the 2 and 3 month T-bill yields skyrocketed today? I’ve seen such huge moves in notes and bonds, but not in 2 and 3 month T-bills
It’s getting plenty of “clicks” on my site.
Dear Wolf,
Do these 2025 unemployment figures include the 350,000 or so DOGE-related firings and buyouts in 1Q2025?
Your reports have been enlightening!
Many thanks.
Anyone filing for unemployment insurance is included.
wild it has not been higher with all the cuts in local state and federal the ballooned the last 4 years private sector has been increasing this year to help reduce the shock.
Broadly speaking, do you see any correlation between your recession indicator and the S&P? Asking for a friend.
I may be wrong, but I think it’s the case that for every bear market/recession combination in the past, the start of the bear market has always been well ahead of the start of the recession. Unemployment may be rising in a market downturn, but unemployment has to suddenly go parabolic to trigger the recession call.
Many people expect economic events to happen quickly, almost like a plane crash. But I think that more recessions start slowly, perhaps over a quarter or more, before people notice and the data arrives finally to confirm the conclusion that yes, a recession started a few quarters earlier. Most data lags real trends by at least a quarter.
I do think that the new Jobs Claim Report as well as the Continuing Claims Report have little lag effect and are one of my favorite economic metrics. The other metric I watch is the 10 year Treasury, which is confused right now because of the debt ceiling issue and tariffs. We will definitely have a much better idea soon. But maybe not….
Also every recession is different. Dotcom vs financial crisis.
Yep, every recession and every stock market crash seems to be caused by something different and unexpected. What went too far this time? QE? ….. the crash, the recession, hasn’t happened yet, so, inconclusive. Economists and the econ-minded just know (should know), it’s coming. We just don’t know when.
The people who just can’t help but freak out don’t understand Wolf’s point, unemployment is dang low. The economic problemas we’re worried about are not materializing right now.
…uhhh can’t help but throw in my 2 cents…my prediction, once RE is clearly dropping, POTUS will kick JP so many times that he’ll give in and drop rates. Maybe he stays strong, maybe he sides with Mr.Musk who I’m sure would say stop throwing money at the situation. Maybe we’ll let the cycle cycle.
In any case, love the data, Wolf.
People forgot that unemployment spiked near 10% in October 2009 and it took until 2017 to reach 4.2%, which is where it is now.
The dotcom bust went from 3.9 to 6.3.
So if the recession is only a few months like the dotcom bubble then we are fine. If something like the financial crisis then whoops.
The free money era is over and it might suck for a bit but that’s why you don’t do free money
Powell and the Fed messed this up in my opinion. They probably shouldn’t have lowered rates at all last year. The rate might be in a good place but if unemployment is going to go up then they’ll have to cut unless inflation skyrockets too which it likely won’t.
…always a good idea to periodically look into all of those frogpots simmering on the cooktop to check their rates of boil…(thanks, Wolf!).
may we all find a better day.
Trump will fire JP soon. He’s getting boulder and more reckless by the day. Doesn’t give a hoot what anybody thinks.
“So if the recession is only a few months like the dotcom bubble then we are fine. If something like the financial crisis then whoops.”
A few months? Were you not alive then? You don’t remember the “Jobless recovery”?
you take CA out of the job numbers, gdp, etc and they are a nice nudge better too
Anthony Ace,
Nope.
California real GDP grew by 1.4% in Q4, and by 3.6% in all of 2024 (faster than US GDP growth in 2024 of 2.8%), according to latest state-level data from the BEA.
And total employment in CA has risen every single month so far this year, from 18.618 million in Dec to 18.699 million in April, that’s a job growth of 81,000 over the period.
https://www.bls.gov/eag/eag.ca.htm
CA current-dollar GDP in 2024 reached $4.1 trillion. If CA were a country, it would be the 4th largest economy in the world, behind the US, China, and Germany, but ahead of Japan and all the other countries.
https://www.gov.ca.gov/2025/04/23/california-is-now-the-4th-largest-economy-in-the-world/
Does Maybe and Maybe Not mean the same thing?
maybe they do
maybe they don’t
The richest man in Rome during Ceasars time was a real estate developer who put down the Spartacus revolt only to die later trying to expand the empire along with his son… are the unemployment accounts still borrowing from the Federal government or are they replenished…
The borrowed funds are being repaid. My Wolf Street Media Mogul Empire pays California’s UI system an extra assessment every year to fund the repayment of the borrowed UI money.
Nice. Similarly initial unemployment claims is a very good indicator. It has ticked up from all-time lows of 200k to currently about 240k, but it would need to hit at least 300k (perhaps as high as 350k) to signal real trouble.
ALSO factor in local, state and federal employment is all down and reversing in many areas after being one the largest gains the last 4 years
If I was a betting man, I’d say unemployment will rise from here.
In our little corner of the world making truck equipment in the Midwest, we’ve done widespread layoffs only twice in the last twenty years – 08/09 and late 2019 to mid 2020 (PPP and other efforts distorted that plan). Our fortune generally follows the economy wherever it leads, good or bad. 2021-2024 were slammed busy, but that has now faded.
Much like the RV industry, I tend to view our industry as a bellwether for the economy, and our employment has followed in the past.
Orders have absolutely cratered since the start of February to around half of their five-year average almost overnight. June orders are coming in much lighter than that. And before anyone says, “it’s just you”, I assure you, it is not. One of our largest customers just announced three plant closures. Word has it our leading competitor said their orders are “down by about half” right now.
We cut capital investment in Q1. We cut OT and froze hiring this spring. Modest layoffs hit in May. June will fully exhaust the backlog. The stock warehouse is already full to the brim, so in July it gets ugly. Unless everyone decides to start buying commercial trucks again in the next few weeks, half our shop will be filing for unemployment in July.
Maybe it’ll be a short-lived dip, and we’ll be back to normal soon. The mood is not optimistic here right now.
Considering unemployment is at or near all time lows that isn’t really a hard bet. Also 2021-2024 was the free money era. Of course orders went through the roof.
There were two or three times over the last couple years where it seemed like things were freezing up. Each time, orders rolled in, and we avoided any real slowdown or layoffs until now. This one appears to be sticking.
What kind of trucks?
Cannot reply directly to your comment, but all shapes and sizes of trucks from van boxes to refrigerated boxes to flat beds to utility bodies and pickups, class 4-8. Class 6 dry freight is the heart of the market.
Perhaps another bell weather industry is R.V.’s. Elkhart Indiana is the Capital of production in the U.D. The manufacturers have announced lay-offs for the past several months. Maybe the “free” money has dryed up, or overproduction has led to this. The Company’s have said, at this time only temporary employees will be let go, those with seniority will not be. I think the industry is cycling as usual.
It’s been said Michigan feels it first due to the auto industry.
In the world of truckload logistics in/out of Detroit/MI
moving automotive, food, and bldg materials.
Rates are low, shippers are lethargic.
A lot of idle equipment and excess capacity.
Carriers & Drivers are broke and disgruntled.
The work is not worth doing if the profit margin is zero.
In the latest Dept of Labor unemployment release, Michigan had the largest drop of any state in initial unemployment claims, falling almost 4,000.
Higher policy uncertainty means lower investment, higher risk aversion among capitalists.
Lot of people have reduced/frozen their investment/hiring/spending as they wait for clarity on tariffs, the federal budget, and how aggressive the feds get on deporting the American workforce.
Wolf,
How do you derive the recession indicator line, the black line in your graph?
Thanks
I explained it in the article.
Without the fear of recession the Fed is not going to ease much or at all( todays 3 month t bill action) if employment stays at a low rate. People are negotiating pay raises higher than inflation data, my guess is inflation is going to spike or wage hikes will fall. Mag 7 has been underperforming Sp 500 for an awhile now, that’s been reliable sign for risk rolling over. I am biased and looking for a top in equities and the asset bubble. Yesterday bearish russel 2000 action continues today, moving further below its downward sloping 200 DMA. Thanks Wolf for the continuation of Data in an easy to read format!
I’ve never really paid attention to the Russell but it is interesting. I didn’t realize it peaked at 2300 in early 2021 and hasn’t really recovered fully for a substantial time.
Is there a reason? Mostly small cap and mid cap right?
Iwm~Russel 2000 are just small caps,mdy~ mid cap 400 captures the mid caps, RSP equal weight 500 and the SPY~sp 500 that factors in market cap. The mag 7(mags)has been big influence in the sp 500. It would be healthy if money comes out of mag 7 and goes into Russell 2000, but that’s not happing either. Willshire 5000 covers the total us stock market, 1 point equals 1 billion USD. Today the willshire closed at 60366 equaling 60 trillion and 366 billion of total US stock market cap. 61.7 trillion is the all time high on a daily basis. But on a weekly closing basis we had a double top at 61.4T in December and Feb, that secular bearish! it’s like climbing Everest each step towards the peak gets harder. Looking for down day tomorrow to close out the week in the red, then rollover of risk! It’s like watching paint dry! For the week, bitcoin completed an inverted cup, if bitcoins gets under 100k…risk off and we get back to retest of the April lows with all Risk! The $vix fear index for SP 500 raised its hand today and said look at me, will see what happens tomorrow. Take a look at RSP the equal weight 500, dead money from May 20th and a fail to get above its May high. The direction of the YEN is a key. I am biased that we will get new lows, the charts don’t lie, time will tell!
Well Israel might help push things along lol
The 30 year was almost at 5%!
I was tempted.
It’s quite something to have a guranteed 5% for 30 years.
The banks will prob eventually offer 1-2%, money markets 2.5-3%.
Heck a 60/40 stock bond fund averages at 6.5% and that risk is much greater than a t note.
The insured Unemployment of 64M, 56M and 49M seem way too high. Are you missing a decimal point?
Goodness, thanks. It’s a quirk in the system I use, and I know better than to use bullet points with numbers because the html conversion strips out everything before the first period. So “2.64 million…” became “64 million.” I don’t know how often I’ve fallen into this trap over the years.
Would be interesting to know what effect the aging population has had (and will have as long as the asset bubble persists) on unemployment numbers and unemployment rate. How many people have started to collect social security early, leave the labor force, and started trading (gambling) with their 401k instead? Or became “investors” in real estate, bitcoin, or precious metals? I would guess that recession indicator line is quite a bit flatter now than it used to be.
Certainly, there are quite a bit of people that retired at age of 35, riding the QE period and converting on the fly that rapidly debasing currency to inflation-proof assets and they no longer need to work and focus on other life activities.
My oldest child got laid off from their job due to some of their techs moving away and the owner needed to take her hours. She made more in one day doing Uber & Doordash than unemployment would’ve paid for the week. She never bothered to apply for unemployment before starting another job a month later.
She cannot file for UI if she’s working. She wasn’t unemployed, she worked for Uber and Doordash.
I don’t see a recession this year. There have not been two recessions less than seven years apart, so based on that stat alone, the probability is very low. I still see a very overvalued stock market, due mainly to the tech giants and their heavy weighting in the S&P 500 and the Nasdaq 100.
The AI hype is back in full swing, with the promoters on CNBC today repeating their chant that it’s bigger than the internet, bigger than the industrial revolution, bigger than everything, and oh yes, it’s just the first inning. (According to them, it’s been the first inning for two years now.)
I have no desire whatsoever to have a conversation with a machine, or a robot for a companion. (That is really sick.) I feel like Silicon Valley and Wall Street are desperate to find something new, whether we need it or not. I feel like it’s being forced upon us.
I have not changed my view that you will see the S&P 500 at 4500 again at some point.
Eh I think 4500 is a stretch. We already hit 4800 on insane tariff rates which drove pe ratios down to 25. Times are so different now that historic pe ratios don’t matter as much.
covid was not a recession (and the only one in 7 years) it was an excuse to unleash more money into the economy than we have ever seen (except 2008 the last real recession we have had). We have had to crazy high free money periods combined with record gov spending 2008 to 2024 … the 15 year growth run we were on (one of the longest in history and largest).
If the AI becomes sentient it will definitely kill us. But hey, at least stock market valuations won’t matter.
AI will not become sentient. This is stuff is just powerful statistics combined with non-linear compression techniques.
Don’t let it fool you
AI can never be sentient mathematically. It is programmed which therefore prohibits the independent freedom to present a different point of view other than what the model’s algorithm allows.
Ultimately, irrelevance. Fingers and toes crossed.
Then there are those guys trying to make an AI that is built along the lines of a human brain in terms of number of connections, architecture etc. If you can build an artificial network that mimics the natural network, how are you gonna tell the difference, besides in speed?
Let’s hope all those statistical whatsis are feeling generous towards their creators when that comes along…
Short-term hotel room rentals and tour bookings very suddenly cratered in my state in the second half of May by 20%-30%. This is at the beginning of our peak season. Tourists from Canada, Australia, UK and EU have mostly disappeared. Someone flying in from London last week reported that the plane was almost empty.
What state?
Apple offered this statement in a recent study on AI
“ Cutting-edge AI models from OpenAI and DeepSeek undergo ‘complete collapse’ when problems get too difficult, study reveals” but seems to be ignored so far . The financial industry sells stocks and the latest and greatest .
My daughter used AI to generate a Mural for her STR wall that was easy to paint in less than 4 hrs . There are some benefits . How valuable ? Not life changing at all. Replacing labor ? Maybe some positions but I have faiiled to see AI answer few if any of my issues except for appointment setting .
Wolf has mentioned several times how AI investment is moving the needle for GDP with the Mag7 plus others buying from each other spending capex like the housing boom in 2006 and the dot com boom plus Enron selling weather and fiber ROW plus any other service they could dream up.
Bubbles end badly but can last longer than we realize human emotions are strong . Wolf says the curve is rising and note that when they do change the rise is dramatic .
Pandemic cash and higher rates from my savings is increasingly spend in retirement so I’m part of the delay in any slowdown.
Please no recession my Children need their jobs and my grandkids need pizza
Which is exactly why a diversified portfolio makes sense.
Might there be any impact to unemployment numbers from the newfound preponderance of gig-economy workers? There anre tons of 1099 contractors driving for uber and grubhub or providing cleaning and maintenance for AirBnBs that didn’t exist until after GFC. If these workers have their jobs/pay dwindle due to lower demand would there be any impact in the unemplyment metrics? And if not, does it even matter?
Gig work has always been around. It’s not new, and its share of total employment hasn’t changed much despite the hype. So it’s like a constant, and you can ignore constants when you compare current data to past data that both have, and comparing current data with past data is what I’m doing here.
Starbucks hiring 85,000 people. We are so back
Eric86:
See the wolfstreet nuggets:
“If about 5% of the comments under one article are yours, it’s time to back off.
Most of mine were actual conversations with people but okay.
Oil prices surge over 7%, U.S. stock futures fall as Israel strikes Iran’s nuclear sites
It’s interesting – agree no recession is currently in sight. What I’ve started thinking is the excess is being slowly drained from the economy. Travel is down, housing and rent are slowly coming down, and there’s no longer a labor shortage – but it’s still up enough that none of the indicators look bad, plus things are more expensive. It’s the only explanation I have for what I hear vs what I see in the numbers. If it continues in this direction we could get a recession, but we may also just cut rates…. so it’s hard to say. The employment market feels worse than anytime since 2010 to me if you’re looking for a white collar job though. Especially if you’re in tech.
Dow falls 500 points at opening bell after Israel strikes Iran
How is the recession indicator line calculated?
Read the article!!
Is it possible the huge surge of immigration has changed the level of the Recession Indicator line?
No because illegal immigrants don’t qualify for UI and cannot apply for UI and cannot be part of these figures, and never were. Also many legal immigrants are not eligible for UI, such as H1B visa holders. Green-card holders are eligible and are part of these figures.
This mentality of protecting self interest is going to be a hard pill to swallow when main land China is in control of Taiwan Semiconductor in a few years.
Great chart!
One question: In both the 2021 and 2008 recessions, the stock market peaked well ahead. At what stage of the unemployment rate increase did the stock market start its downturn?
Would that number be just above 2M or we already there right now?
A sharp decline in the stock market can CAUSE a recession. We saw that during the Dotcom bust. Stocks started crashing in March 2000, and over a 2.5-year period, the Nasdaq crashed 78% and the S&P 500 crashed 50%. It was a year after the crash began, that the recession began (March 2001). That is a well-known effect and includes the issues of companies whose stocks crashed not being able to raise money any longer cutting back on employment and spending, and it includes the effects of consumers seeing their wealth vanish and cutting back on their spending.
from above, one indicator: In Nashville our Airbnb bookings are down in half from a year ago. Since they are in the future, they could still yet book. I can say we are getting no Canadians (can’t imagine why!).
Wolf,
So if I’m doing the math right, if we’re currently sitting on 4.2% unemployment at about 1.95 million unemployed you’re saying that we would need to have about 2.75 million unemployed or an increase to just about 5.9% unemployment to trigger a recession?
I understand that the SAHM rule failed this past year in so much as we exceeded their threshold of a 0.5% increase in unemployment in a 12 month period but no recession. If we use your indicator above, then even if we DOUBLED the SAHM rule’s threshold of a 1% jump in unemployment in the next 12 months, you still don’t think we’d be facing a recession? That it doesn’t matter how quickly unemployment gyrates, but the total number of people out of work?
To clarify the terminology: It’s not 1.95 million “unemployed” but 1.95 million “Insured Unemployed” = only people who have filed for unemployment insurance benefits for at least a second week. This is not the total number of unemployed, which includes many people who are not eligible to file for unemployment for whatever reason. There are over 7 million “unemployed,” which produces the unemployment rate of 4.2%, which are different metrics obtained differently (via survey).
The reason the Sahm Rule failed is because it only looks at the rate of increase, not at the level, and the rate of increase came off the record low levels during the labor shortages, and was just normalizing… it just went back to the Good Times normal levels. And that’s not a downturn at all.
If the rule had also considered a minimum level, in addition to the rate of increase, it would not have given a false positive. My indicator looks at level and rate of increase both — and it’s why it hasn’t given a false positive.