The FRED Blog has discussed initial claims for state unemployment insurance benefits (initial claims, for short) as an economic indicator. Today, we discuss whether initial claims above 400,000 signal weakening labor market conditions.

Our FRED graph above shows weekly initial claims data reported by the US Employment and Training Administration from January 1967 to May 2025: The latest available value at the time of this writing is 229,000 on May 10. The data are displayed in a logarithmic scale to accommodate the large COVID-19-related spike of 6,137,000.

The dashed green horizontal line in the graph is positioned at a value of 400,000. This “rule of thumb” value is commonly referenced by business economists as the threshold, if crossed, that signals weakening labor market conditions. Recent research by Michael McCracken and Trần Khánh Ngân from the St. Louis Fed investigates the accuracy of this figure.

Their results show that the threshold value that is most accurate for signaling economic turning points varies significantly over time. And, since 1984, it stands around 434,165, which is significantly higher than in previous decades. Their results also show the optimal threshold value seems more informative for gauging labor market conditions during expansionary rather than recessionary periods.

For more about this and other research, visit the publications page of the St. Louis Fed’s website, which offers an array of economic analysis and expertise provided by our staff.

How this graph was created: Search FRED for and select “Initial Claims.” From the “Edit Graph” panel, use the “Add Line” tab to select the option “Create user-defined line.” Type “400000” in the boxes labeled “Value start/end.” Use the “Format” tab to select “Display > Log scale left.”

Suggested by Diego Mendez-Carbajo.