Initial jobless claims tumbled to a fresh pandemic low last week, perhaps suggesting the US labor market is still on the mend despite a disappointing August jobs report which showed hiring momentum in leisure and hospitality stalled altogether last month.
Just 310,000 Americans filed for unemployment benefits in the week ending September 4, down 35,000 from an upwardly-revised 345,000 in the prior week (figure below).
The market expected 335,000 on the headline, so this was a notable beat.
The four-week moving average fell to 339,500.
The drop in initial claims was the sixth in seven weeks and the largest weekly decline since late June (figure below).
Continuing claims for the week ended August 28 were 2.783 million, slightly more than anticipated.
Besides inflation, there’s no hotter topic on the US macro front than jobless benefits and the extent to which pandemic programs designed to supplement the standard safety net are contributing to well-documented “frictions.” Those frictions are blamed for the widest disparity between vacancies and hires on record (figure below).
This week, key programs expired, which means we’re about to find out whether generous federal benefits were in fact the proximate cause for workers’ reluctance to go back to punching the clock.
I’d like to tell you that virtually no one thinks it’s that simple, but alas, many people seem to believe it is.
During the week of August 21, 5,090,524 and 3,807,646 Americans were receiving Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation, respectively.
“The balance of September will be far more informative as to the pace of job creation as investors remain wary of a repeat of the August BLS data,” BMO’s Ian Lyngen said Thursday morning.
One might suggest the moment of truth is at hand, although I’d wager it’ll be next year before we get a truly “clean” read on the US labor market.
Although difficult, if not impossible, to quantify; there are three other sizable groups that are not rushing back into the work force.
First, those double income families who realized that almost the entire second income got spent on child care, eating out (too tired to cook), frivolous expenses (frazzled, therefore deserving), extra clothes, and personal grooming. They are realizing that maybe their family life is better with only one worker. Cooking dinner is not that hard and tastes better, let alone being healthier. Maybe this change is permanent?
Second, those who took advantage of unemployment assistance/lower expenses such as travel, etc. during covid, to pay down and/or refinance debt. They have freed up some reoccurring cash to spend in other areas and aren’t desperate to get back to work. Maybe this group is waiting?
Third, those who worked and enjoyed having some extra cash/social interaction- but not to the level that it is worth potentially getting sick, as a result of going to work. This group has essential costs already covered and they are willing to postpone/give up travel, going out and additional nice to have, but unnecessary, possessions. This group is also waiting?
Interesting observation. I’ve thought about the questions around choosing to step away from work. Dual income couples rebalancing job commitments against family values and interests makes a lot of sense. This may persist to some degree.
People who need jobs can get them. BLS survey for “Jobs hard to get” is <15%, at or near the lowest level in 50 years.
More people will need jobs. DOL data show states that ended the $300/wk UE benefit “early” have seen continuing claims drop 2X as fast as other states.
More will need jobs + those who need jobs can get them = we’ll see job growth. Delta may have stalled things, but this Covid surge has peaked and is rolling over (in the US).
We won’t get to full employment like flipping a switch. Emptynester describes groups who are not in a hurry to get jobs. Retirements are up. It takes time to match workers with positions (labor market friction). To fill spots in the near term, businesses will have to raise pay, offer more flexibility, relax hiring criteria. Wage inflation is a good thing.
Fears of a structural labor shortage seem overblown. U6 is still nearly 9%.
Thus, I am not concerned about employment. I’m not sure the market is either – big yawn to the August jobs report, etc.
https://katu.com/amp/news/local/restaurant-owners-in-portland-see-spike-in-applications-as-federal-jobless-benefits-end
Anectodal but in the next month we’ll see if the labor shortage starts easing. I suspect yes – even if PUA was only a modest factor, ending PUA will move the needle and investors will extrapolate the rest.