Over the past month, a hodgepodge of key economic data beat expectations, helping to fuel the “V-shaped” recovery narrative.
The May jobs report, retail sales, and PMIs all emboldened those who are keen to embrace the reopening story, and mobility data showing life in America gradually returning to some semblance of “normal” helped make the case.
Through it all, jobless claims refused to play along. Yes, the trend is obviously lower from the unfathomable levels witnessed during the most acute weeks of the lockdowns, but the weekly numbers remain elevated and continuing claims have proven to be frustratingly stubborn.
On Thursday, the latest numbers show another 1,480,000 million Americans filed for unemployment benefits last week, down just 60,000 from the previous week’s total, which was revised up to 1,540,000.
The headline print is considerably worse than estimates. Economists were looking for 1.32 million. 1.48 million very nearly matched the most pessimistic guess.
The four-week moving average (orange line in the figure) dropped to 1.62 million.
Continuing claims fell 767,000 to 19.522 million in the week ending June 13. That looks to be below estimates. Consensus was looking for 20 million. It’s possible that will be seen as incrementally positive news.
Still, the bottom line is that weekly claims have all but stopped falling. I suppose that’s to be expected, and I wouldn’t want to give the impression that anyone with any sense thought the normalization process would be quick.
The point, rather, is just to say that these numbers aren’t generally consistent with the idea that the labor market is healing rapidly.
This makes two weeks in a row of worse-than-expected claims figures, and you’re reminded that Congress is not expected to come to any kind of consensus on whether to extend the extra federal unemployment assistance offered on top of state benefits until after the July recess.
Additionally, it is still far from clear how much of the improvement in the labor market is due to the Paycheck Protection Program (PPP).
It goes without saying that if demand is structurally impaired or takes another hit from, for example, renewed lockdowns in states where virus cases are rising, or from “self-imposed” stay-at-home protocols as citizens worry about the headlines that are plastered all over the evening news, the jobs that were added back and/or retained thanks to the PPP could eventually be lost.
Congress would do well to consider passing another relief package sooner rather than later. Republicans will not want to be seen, in hindsight, as an impediment to another stimulus deal if, come November, the monthly jobs reports aren’t “great again”.