Kevin Warsh pointed to record low jobless claims this week as proof that the labor market is in good shape, but that reading leaves out the part of the jobs picture that matters most: hiring is weak. Claims are near historic lows, yet the labor market is still being described as a low-hire, low-fire market.
That is why Edd has become a useful shorthand for a familiar fight over the Fed's labor-side mandate. Warsh said unemployment claims, on a four-week moving average, are running at levels consistent with full employment. On that measure alone, the case looks clean. But claims only measure layoffs, not hiring, so they can tell you workers are not being let go in large numbers without telling you whether firms are actually taking people on.
The hiring data fill in the missing half. The JOLTS Hires level is at a 12-year low, and it is at the same level today as it was in 2014. That is the part that makes the claims data look like a half truth. The Cleveland Fed has called the situation a half a misnomer, because the labor market can look steady if layoffs stay muted even while hiring slips into the background. In other words, the market may be calm, but it is not lively.
That matters because a low-fire labor market gives workers little cushion if the economy weakens further. Indeed's Hiring Lab said it is only stable as long as nothing pushes on it. Once layoffs rise, the weakness in hiring becomes a bigger problem, since there are fewer openings to absorb displaced workers. Low claims can miss that fragility entirely.
The pressure is sharper because paychecks are not keeping up with the cost of living the way they should. estimated the average wage coverage gap at $1,400, bigger than ever in 2024, and that gap has not kept up with inflation. Gig and part-time jobs have kept up with inflation better than unemployment claims payouts, which means the safety net has lagged even as everyday costs have moved higher.
Markets were reading the same labor story through a different lens this week. The Fed's rate hike pushed the S&P 500 down toward 7,585 midweek before it recovered to end the week at 7,637.76. Even so, the index stayed above its rising 50-day moving average and 200-day moving average, though the weekly range was the widest in more than a month. The broader trend held, but conviction was thinner.
That is the real answer to Warsh's argument. Low claims do show layoffs are restrained, and that is a measure of stability. They do not prove the labor market is strong, because hiring is still stuck at a 12-year low. If layoffs stay quiet, the reading can look healthy; if they do not, the lack of hiring will make the downturn harsher, not softer.
