Dec. 11, 2025

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Pay Attention To The Weekly Jobless Claims To Find Economic Trouble Coming

By Robert Romano

Unemployment continued claims, not seasonally adjusted, jumped the week of Nov. 29 by 268,460 to 1.96 million, as initial claims also increased to 313,400 the week of Dec. 6, according to the latest data compiled by the U.S. Department of Labor.

Almost certainly, this is just normal churning in labor markets headed towards the Christmas season. Usually, you’ll see a spike in initial and continued claims the first week of December after Thanksgiving in the non-seasonal numbers but see it normalized in the seasonal numbers. The same thing happens after Christmas.

It might not be anything significant this time — the seasonally adjusted data said continued claims decreased by 99,000 to 1.8 million — but the weekly jobless claims reports are still a really good place to look for any early warning signs during recessions. 

During Covid in 2020, the first sign of trouble economically came from the March 14, 2020 weekly jobless claims report that showed a significant uptick in initial claims in both the seasonal and non-seasonal data, up 65,000 or 31 percent to 273,000, and up 52,000 or 26 percent to 251,875, respectively.

A week later, the gargantuan numbers started coming in: 2.9 million initial claims the week of March 21, 2020, 5.87 million the week of March 28, 2020 and so forth. All told, 25 million Americans were in the process of temporarily losing their jobs in the span of two months during the economic lockdowns, and about 21 million of them wound up on unemployment insurance almost immediately. 

The point is, one didn’t have to wait for the March and April unemployment reports that would not be released until April 3, 2020 and May 8, 2020, respectively, to find out the economy was in very serious trouble.

For the most recent jobless claims report, seasonal initial claims increased 44,000 or 23 percent to 236,000 and non-seasonal initial claims increased 114,967 or 58 percent 313,400. Again, this could just be the normal churn one should expect towards the end of the year.

Besides a spate of corporate layoffs news the past month, another helpful place to look has been the spread between 10-year treasuries and 2-year treasuries. Normally, a reliable recession predictor — the 10-year, 2-year spread tends to invert prior to recessions by several months — the time to really watch it is when it uninverts, as that tends to correlate with periods of rising unemployment. Well, right now at 0.61, it is getting close to its September high of 0.638 and its April high of 0.668.

The bad news is that as the 10-year, 2-year spread rises, unemployment tends to rise, too. As the 10-year, 2-year began uninverting, the unemployment level has increased 1.85 million since Jan. 2023 to its current 7.6 million level. The unemployment rate is up from its 3.4 percent low in April 2023 to now 4.4 percent. 

The good news is that inflation usually slows down during periods of increasing unemployment, as it has been doing since inflation peaked in June 2022 at 9.1 percent, down to its current 3 percent level. 

Occasionally, as inflation rachets upward, unemployment can go up, too, the recession comes and then inflation cools as unemployment keeps rising. Usually, like in the current cycle, the inflation comes first, and then the unemployment.  

That’s usually when the Federal Reserve will cut interest rates in response to a weakening labor markets, which they did again on Dec. 11 another 0.25 percent to 3.5 percent to 3.75 percent. This is yet another acknowledgement that peak inflation is behind us and job losses are the near and present danger.

Politically for President Donald Trump and Republicans hoping to hold onto House and Senate majorities in 2026, that might be good news or bad news depending on how you look at it. Recessions and slowdowns usually take inflation down. But losing jobs hurts American households, too. 

Inflation is likely worse, though; just ask Gerald Ford, Jimmy Carter, George H.W. Bush and Joe Biden, all one-term presidents who saw inflation outpace incomes during their administrations. Whereas Richard Nixon, Ronald Reagan, George W. Bush and Barack Obama all had recessions early in their first terms and went on to get reelected. If there’s a slowdown, the sooner the better.

Towards the end of the cycle, unemployment can increase more rapidly before settling down when labor markets hit their bottoms in the slowdown or recession. Given where we are now, that might be sooner rather than later. For any administration, it makes sense to get ahead of that and to anticipate it. 

So, despite the seasonal adjustments in the weekly jobless claims reports at this time of year, they’re still a really good thing to be watching right about now. They’ll be the first to tell you something’s wrong. Usually, they’re uninteresting and that’s a good thing. If they start becoming interesting, watch out. 

Robert Romano is the Executive Director of Americans for Limited Government Foundation. 

To view online: https://dailytorch.com/2025/12/pay-attention-to-the-weekly-jobless-claims-to-find-economic-trouble-coming/