Although the worst GDP report in US history will grab most of the macro headlines Thursday, it was the latest jobless claims numbers that arguably mattered more for markets.
After all, everyone knew the US suffered the worst contraction “in living memory” (to quote Jerome Powell) during the second quarter. Analysts and economists have spent the last four months tweaking their estimates and forecasts, so it was little surprise when the first “official” reading betrayed a 32.9% (annualized) slump.
Unlike the “stale” GDP report, jobless claims are a high frequency indicator, and they’ve taken on special import in the wake of new virus containment protocols across a number of US states experiencing COVID-19 flare-ups.
Last week, initial claims rose for the first time since March, in what many suggested was an ominous harbinger as Congress dithers on the next phase of virus relief, including the extension of federal unemployment assistance which has already lapsed.
That was the setup for Thursday’s claims data, and it comes as Republicans continue to push for a plan that involves slashing extra jobless benefits by as much as a third, a development which virtually everyone in the economic and financial community worries will deal a severe blow to consumer spending.
Against that decidedly tenuous backdrop, another 1.43 million Americans filed for unemployment benefits last week. That’s essentially in line with estimates, and represents another weekly increase. Last week’s figures were revised up to 1,422,000. Once again, the intractable nature of the labor market malaise is laid bare by weekly claims data.
The four-week moving average for initial claims (orange line in the figure) moved higher to 1,368,500.
The bright spot in last week’s report was a drop in continuing claims. This week’s numbers show continuing claims rose 867,000 to 17,018,000. That is considerably worse than economists expected. Consensus was looking for 16.2 million.
Sadly, I’m left to recycle the language from last week’s claims coverage. What you see in the figure (below) should increase the sense of urgency on Capitol Hill.
For millions of Americans, there is no light at the end of this tunnel as of yet.
Remember, thousands of businesses are closing permanently, and even some who received Paycheck Protection Program loans now indicate there are no guarantees they will be able to keep the doors open if the current economic conditions persist.
For some small business owners, the situation is increasingly hopeless — anecdotal accounts from some virus “hotspot” states have a decidedly fatalistic tone.
Total claimants in all programs fell to 30,202,498 in the week ending July 11. That’s a sizable decline, but the disparity between the “official” number of unemployed Americans and those claiming benefits of some kind remains very large.
All in all, this is not good news. If there’s a silver lining, it may be that it prompts lawmakers to hurry along with the next stimulus package. Then again, some on Capitol Hill seem unmoved by the plight of everyday people, even as they weep (figuratively) for America’s corporate “citizens”.
Congressional Republicans are going to look at this morning’s numbers and do what they do best: form a circle and start shooting.