US jobless claims surged last week by the most since July, a decidedly poor update on a hopelessly distorted labor market showed.
Initial claims were 286,000 in the week to January 15, the most since October.
The four-week moving average, which was loitering near a half-century low, increased 20,000 (figure below).
Continuing claims rose 84,000 to 1.635 million in the week to January 8, well more than the 1.56 million the market anticipated.
Consensus expected 225,000 on the headline initial claims print. No economist, out of more than three-dozen surveyed, expected a print beyond 255,000.
The relatively dour news was yet another ominous development for an economy staring down a waning fiscal impulse and an imminent Fed tightening cycle. Earlier this week, Empire manufacturing posted a huge miss, and last week’s data suggested the US consumer is exhausted as rising prices weigh on sentiment.
Invariably, some will suggest it’s best to ignore the claims data given seasonal adjustment “noise.” But market watchers have been saying the same thing about lower-than-expected claims since November. You’d be forgiven for arguing that, to the extent such analysis has merit, the adjustments are doing more harm than good. Unadjusted claims fell.
A simpler explanation is that soaring COVID caseloads are impacting the jobs market (figure below). But what do I know?
Mercifully, Philly Fed managed to beat estimates with a decent 23.2 print (consensus was 19). Unfortunately, “price increases remain widespread,” as the accompanying color put it. Prices paid rose to 72.5, still off the highs but extremely elevated nonetheless. Almost three quarters of firms said their input prices rose. Meanwhile, prices received dropped a second month, which seems to indicate margin erosion is afoot.
This month’s special questions centered on expectations for input and labor costs in 2022. Not surprisingly, firms expect costs to go up. Asked how this year will compare to 2021, survey participants “indicated increases across all categories of expenses.” Respondents see raw materials prices up almost 9% and total comp increasing 6.4%.
There is a great article in today’s WSJ discussing the US labor force and in particular, the labor participation rate. The article addresses the massive expansion that the US has had in the last 20 years in the number of workers who qualify for and receive disability benefits. I won’t quote numbers here, but it is frightening. Turns out there are a huge number of people sitting home, collecting disability and, based on surveys, spending 2000 plus hours/year plugged into a screen. The US participation rate is now worse than Europe.
Time to redefine the qualifications for disability insurance? Why is no one talking about this?
What to do? Let them starve in place or reopen Auschwitz.
Retrain with a new skill that does not rely on the disabled part of their person.
An initiative to more carefully review who qualifies for disability and who qualifies for retraining for a new skill that does not depend on the disabled skill will, ceteris paribus (a new phrase for me that I could not wait to use), increase labor participation and help to relieve worker shortages.
Oh! A new government program. I’m sure Manchin, Sinema and dozens of Republican senators will enthusiastically get behind this as soon as they can find a way to profit from it.