Hmmm: Weekly jobless claims still at 1.3 million -- but continuing claims drop sharply

Good news or bad news? As it has been for the last four months, the weekly jobless claims report has some of both. On the bad side, the number of claims remains stubbornly in the seven-figure range, albeit somewhat better than expectations at 1.314 million initial claims in the week ending July 4. That’s down nearly 100K from the previous week, but that still puts the level at nearly twice the level of the pre-COVID record high:

In the week ending July 4, the advance figure for seasonally adjusted initial claims was 1,314,000, a decrease of 99,000 from the previous week’s revised level. The previous week’s level was revised down by 14,000 from 1,427,000 to 1,413,000. The 4-week moving average was 1,437,250, a decrease of 63,000 from the previous week’s revised average. The previous week’s average was revised down by 3,500 from 1,503,750 to 1,500,250.

The good news comes in the number of continuing claims. That too remains at pre-pandemic record highs, but it’s moving in the right direction in a big way. Nearly 700,000 people came off of unemployment in the past week:

The advance seasonally adjusted insured unemployment rate was 12.4 percent for the week ending June 27, a decrease of 0.5 percentage point from the previous week’s revised rate. The previous week’s rate was revised down by 0.3 from 13.2 to 12.9 percent. The advance number for seasonally adjusted insured unemployment during the week ending June 27 was 18,062,000, a decrease of 698,000 from the previous week’s revised level. The previous week’s level was revised down by 530,000 from 19,290,000 to 18,760,000. The 4-week moving average was 19,085,500, a decrease of 636,000 from the previous week’s revised average. The previous week’s average was revised down by 132,500 from 19,854,000 to 19,721,500.

CNBC’s Jeff Cox took the sunny side in reporting the new numbers … mostly, anyway. The topline beat expectations, he notes, and the momentum off of unemployment is a very good sign. Payrolls have expanded the last two months, but Cox writes that it might not get much better than this for a while:

As claims continue to subside, nonfarm payrolls are expanding. The past two months have seen growth of 7.5 million as the unemployment rate has dropped from a pandemic high of 14.7% to 11.1%.

The insured unemployment rate, a basic computation of those collecting benefits vs. the total workforce, fell to 12.4%, a half percentage point decline.

However, the jobs market is far from settled, and most economists figure that the 4.8 million growth in payrolls for June was the high-water mark for hiring. United Airlines this week put 36,000 workers on notice for potential layoffs as the airline industry struggles to regain its footing after a near-shutdown during the crisis.

The New York Times takes the glass-half-empty look, nearly all the way to the bottom. The hiring in May and June didn’t create new jobs but merely refilled the furloughed positions. Job creation is still frozen:

Another one million new claims were filed last week under the federal Pandemic Unemployment Assistance program, which is designed to funnel jobless benefits to freelancers, self-employed and other workers normally ineligible for state unemployment insurance.

Hiring nationwide has picked up in recent weeks, and the overall jobless rate dipped in June to 11.1 percent from a peak of 14.7 percent in April. But most of the payroll gains were because of the rehiring of workers temporarily laid off. The pool of workers whose previous jobs have disappeared and who must search for new ones has grown.

“Their circumstances may be more challenging to rectify than those who were laid off because of a temporary closure,” said Elizabeth Akers, who was a staff economist with the Council of Economic Advisers under President George W. Bush. “Finding new jobs will be more difficult. There’s been scarring in the economy.”

True enough, but also precisely what was expected. New or refilled jobs? That’s just semantics. The economy has to heal by getting the jobs back that people lost first, in order to recreate the dynamism that can create new-new jobs. That is why politicians in both parties have talked about putting people back to work. In fact, given the record-low unemployment the US had before the COVID-19 pandemic hit, putting everyone back to work would probably suffice to fully restore the economy.

What did the markets think of the new jobs report? They seemed to like it, but bear in mind that we’re essentially dealing with a bunch of bookies rather than people investing in economic growth:

The S&P 500 gained 0.2% while the Dow Jones Industrial Average traded just above the flatline. The Nasdaq Composite outperformed, rising 0.7% to a fresh record high.

Netflix and Microsoft were up 0.9% and 1.3%, respectively. Apple advanced 0.8%. Facebook, Amazon and Alphabet also rose. Amazon is up more than 7% week to date and Alphabet has gained over 3% in that time period. Microsoft, Facebook and Apple are all up more than 4% for the week.

Market reactions are much more tied to results against expectations rather than the quality of the results on their own. Still, there does seem to be a bit more enthusiasm at the moment, but wait for consumer-behavior metrics to emerge. If consumers keep up the momentum of their spending in May and June, we can infer that the job market is improving in some significant way. If not, then those weekly jobless claims numbers might be more seriously about the present than about a backlog from several weeks back.

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