Is a Recession Coming? A Key Indicator Is Also the King of Mixed Messages

commentary

(Bloomberg)

A man walks past the New York State Department of Labor offices in Brooklyn, New York, March 25, 2020, photo by Anthony Behar/Reuters

A man walks past the New York State Department of Labor offices in Brooklyn, New York, March 25, 2020

Photo by Anthony Behar/Reuters

by Kathryn A. Edwards

May 27, 2022

Will inflation—or efforts to tame it—lead to a recession in the United States? When such fears arise, people start paying a lot of attention to weekly unemployment-insurance claims, as an early indicator of layoffs that could augur a broader slump.

They should be careful. Unemployment claims are a flawed gauge that may be particularly skewed by the pandemic.

Unemployment benefits go only to those who meet certain criteria: They must be jobless through no fault of their own, have sufficient work history, and be willing and able to work. Over the past 70 years, the share of the unemployed who actually receive payments has decreased from about half to about a third, even as the share of job losers (as opposed to quitters) has increased.…

The remainder of this commentary is available at bloomberg.com.


Kathryn A. Edwards is an economist at the nonprofit, nonpartisan RAND Corporation.

This commentary originally appeared on Bloomberg on May 27, 2022. Commentary gives RAND researchers a platform to convey insights based on their professional expertise and often on their peer-reviewed research and analysis.