economy Markets

Latest Jobless Claims Numbers Suggest We’re Not Out Of The Woods

Reality check?

Another 1.43 million Americans filed for unemployment benefits last week, down just 55,000 from the previous week’s total, which was revised up (slightly) to 1.482 million.

The latest “high-frequency” (if that’s what you want to call it) read on the labor market comes on a day when the June jobs report came in scorching hot. The economy added 4.8 million jobs last month, the BLS said.

You’re reminded that the jobless claims figures haven’t exactly played along with the “V-shaped” recovery narrative. This marks the third straight week that claims have come in worse than anticipated. Consensus was looking for 1.35 million on the headline.

The four-week moving average (orange line in the figure) dropped to 1.5 million.

Continuing claims rose 59,000 to 19.29 million in the week ending June 20. That is a disappointment. The market was looking for 19 million. Perhaps more than any other data point, continuing claims has been a thorn in the side of optimists. Simply put: The numbers are proving to be quite sticky. And that stubborn refusal to drop suggests the labor market isn’t healing as fast as everyone would like to see.

The latest data compels me to say, for the second week in a row, 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. But you should be apprised of this as everyone celebrates the headline NFP print headed into the long US weekend.

With new lockdown measures and containment protocols being implemented across a number of states where virus cases and hospitalizations are rising, one wonders if jobless claims will start to accelerate anew (if “accelerate” is too strong, we can just say “tick higher”, or something more polite).

The figure below (and I’ve used it over and over again) shows government assistance has offset the hit from the labor market’s apocalyptic turn during the pandemic.

As discussed in “Prayers And Fundamentals“, lawmakers need to at least make sure they understand this before they decide to let these extra benefits expire later this month.

I’ll employ the same language here that I used in last week’s jobless claims post as it’s more true now than it was then by virtue of myriad new containment measures in California, Florida, Texas, and Arizona.

If demand is structurally impaired or takes another hit from 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 Paycheck Protection Program could eventually be lost.

One more time: 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 as upbeat as June’s.


 

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