GDP and Jobless Claims — What’s Really Going On
Yesterday we walked through the first look at Q3 GDP, which came in at a strong 4.3% annualized growth rate. On the surface, that sounds like a booming economy—but it doesn’t line up with how things actually feel on the ground. That disconnect highlights some of the shortcomings of GDP as a measure of real economic momentum.
GDP is reported on an annualized basis, meaning the activity that occurred during the quarter is multiplied by four. Small shifts can therefore create big headline numbers. And when you break down the formula—
GDP = Consumption + Investment + Government Spending + (Exports – Imports)
—you can see how the number can be distorted. Inventory build (part of investment), increased government spending, or fewer imports relative to exports—something we’ve seen recently due to tariffs—can all inflate GDP without signaling a healthier consumer.
That’s why we prefer to focus on Real Final Sales to Private Domestic Purchasers, which strips out inventories, government spending, and trade effects and zeroes in on true consumer demand.
Final sales rose 3% in Q3—still solid, but notably weaker than the 4.3% GDP print. More importantly, the year-over-year trend in final sales has been declining since 2023. Add in survey-based data, and the picture becomes even less optimistic. The Fed’s Beige Book continues to show contraction across its twelve districts, and consumer confidence readings remain deeply depressed.
Jobless Claims
Initial Jobless Claims, which track first-time filings for unemployment benefits, fell by 10,000 to 214,000. While that’s a low number, it’s not especially telling this time of year. Employers rarely lay off workers heading into the holidays—unless they’re trying to play the Grinch.
That said, this data doesn’t fully align with the job losses we’ve been seeing in recent labor reports. One likely explanation is the rapid expansion of the gig economy. When workers are laid off and file for benefits, weekly payments—often capped around $400—frequently aren’t enough to cover basic expenses or insurance. As a result, many are pushed into gig work, driving for Uber or DoorDash just to make ends meet.
The number of gig workers has grown by an estimated 5 to 10 million over the past year. Without that outlet, we’d likely be seeing initial jobless claims closer to 300,000 per week.
Continuing Claims, which measure those who remain on unemployment benefits after their initial filing, rose 38,000 to 1.923 million. That’s near the highest level since November 2021 and reinforces a troubling trend: once someone loses a job, it’s taking longer to find a new one as hiring slows.
We already know the labor market has been weakening, especially after the delayed QCEW revisions, which pushed Q2 2024 data out to Q2 2025. Even so, recent monthly reports have shown outright job losses at times, with the unemployment rate climbing from 4.1% in June to 4.6% in November.
What’s masking much of that weakness is Healthcare and Education hiring. These jobs are largely immune to economic cycles and are always needed. Strip those out, and the picture changes dramatically. The remaining 83% of the economy has lost a combined 296,000 jobs since April.