The number of workers starting a period of unemployment is on the rise. The U.S. Department of Labor reported that in the week ended January 30, 2016 285,000 claims were filed, an increase of 8,000 from the previous week’s level. Some of the increase may be due to weekly volatility, but even four-week moving average which strips out the weekly volatility shows an increase in jobless claims (Chart 1). In the four weeks of January 9 – 30, an average of 284,750 workers filed unemployment insurance claims, an increase compared to 263,000 claims filed in October 2015.
The uptick in the number of claims filed appears to be associated with the steep fall in oil prices, plunging from about $100 per barrel in 2012-2014 to about $32 in January 2016. This has led to a cutback in jobs and investment spending in the oil-producing states of Texas, Oklahoma, Louisiana, North Dakota, West Virginia, Wyoming, and New Mexico (Charts 2). In the fourth quarter, the economy expanded at a slower pace of 0.7 percent as spending across most sectors declined, save for residential investment which grew at a healthy pace of 8.1 percent (Chart 3).
Given the headwinds coming from falling oil prices, NAR projects existing home sales of 5.34 million in 2016, a modest increase from the 5.26 million existing homes sold in 2015.