Last week, initial US jobless claims fell below 1 million for the first time since the onset of the pandemic.
963,000 people filing for unemployment benefits is what counts as “good” news in the US these days. It’s a truly surreal state of affairs.
Those hoping to see claims fall further were disappointed on Thursday. Initial claims were 1.1 million last week, much higher than the 920,000 economists expected. This will dent the recovery narrative at the margins, throw a bit of cold water on the July jobs report, and could add a sense of urgency to stalled stimulus talks inside the Beltway.
Last week’s total was revised higher to 971,000. The four-week moving average fell to 1,175,750.
With stimulus talks still deadlocked in Washington and Donald Trump’s executive order extending extra federal unemployment assistance offering little more than a short-term Band-Aid, the weekly claims data is one of the few “official” real-time economic indicators at the market’s disposal. Other high frequency data (e.g., the change in seated restaurant diners, mobility statistics, etc.) generally comes from non-government sources.
Continuing claims fell to 14,844,000. That was less than the 15 million the market was looking for, but perhaps not enough of a beat to overwhelm the miss on the headline initial claims print.
Total claimants fell by 197,601 in the week ending August 1, to 28,059,349.
There are several angles from which one needs to observe this data. From a macro perspective, trends in claims offer a window into businesses’ thinking around the persistence of the virus and how it’s likely to impact economic activity in the critical months ahead. Earnings reports from Target and Walmart “confirmed” that consumer spending bounced back over the past several months, but the two retail giants offered conflicting accounts of who and what to thank for the rebound. Generally speaking, unemployment is poised to reset structurally higher for the foreseeable future, and absent a credibly large fiscal package aimed at addressing the impact on households and businesses, the nascent recovery could falter quickly.
From a political perspective, Republicans can ill afford to see the economy swoon in the weeks leading up to the election. The GOP appears to be banking on the recovery in the stock market and improving data to help make the case to voters, so any incrementally positive news is welcome, and incrementally bad news is… well, bad.
Speaking of bad, you’re reminded that even the “best” claims data in the post-COVID environment would count as unfathomably terrible in the pre-pandemic world.
Just to drive home the point: if you traveled back to January and told an economist that 1.1 million Americans would file for unemployment benefits in a single week during August and that, believe it or not, that week would actually count as a reasonably “good” week, you’d be laughed out of the building or, depending on how worried you sounded, committed to a padded room.