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Revisiting the use of initial jobless claims as a labor market indicator

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  • John Carter Braxton
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    Initial jobless claims provide a weekly snapshot of the labor market. While known for being volatile, when put into the appropriate context initial claims can provide valuable information on the upcoming employment report. This paper introduces a new labor market indicator, referred to as the threshold of initial jobless claims, that serves as a benchmark of comparison for the weekly reporting of initial jobless claims. The threshold incorporates multiple margins of the labor market such as hires, quits, layoffs, and labor force participation. Deviations of observed initial claims from the threshold are shown to provide accurate estimates of the upcoming change in the unemployment rate. Labor market followers can then make weekly comparisons of observed initial claims to the threshold to gain an updated understanding on the current state of the labor market.

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    Paper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number RWP 13-03.

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    Date of creation: 2013
    Handle: RePEc:fip:fedkrw:rwp13-03
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    1. Kevin L. Kliesen & Michael W. McCracken & Linpeng Zheng, 2011. "Initial claims and employment growth: are we at the threshold?," Economic Synopses, Federal Reserve Bank of St. Louis.
    2. Robert G. Valletta & Katherine Kuang, 2011. "Recent layoffs in a fragile labor market," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue sep26.
    3. Kevin L. Kliesen & David C. Wheelock, 2012. "How well do initial claims forecast employment growth over the business cycle and over time?," Economic Synopses, Federal Reserve Bank of St. Louis.
    4. William T. Gavin & Kevin L. Kliesen, 2002. "Unemployment insurance claims and economic activity," Review, Federal Reserve Bank of St. Louis, issue May, pages 15-28.
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