• The latest employment insurance claims report, released on Thursday morning, bodes poorly for next week’s June employment report. And it’s not just that weekly initial claims came in at 1.48 million despite the US being more than a month into reopening.
• The more troubling number is continuing claims, which has flatlined near 20 million since the week ending 23 May (Chart 1). Employers are clearly in no rush to recall furloughed workers…
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- The latest employment insurance claims report, released on Thursday morning, bodes poorly for next week’s June employment report. And it’s not just that weekly initial claims came in at 1.48 million despite the US being more than a month into reopening.
- The more troubling number is continuing claims, which has flatlined near 20 million since the week ending 23 May (Chart 1). Employers are clearly in no rush to recall furloughed workers.
- The last big drop in continuing claims was for the week ending 16 May, when 4.1 million workers stopped receiving jobless benefits, presumably because they went back to work. That was the week that includes 12 May, when the Labor Department conducted its May employment surveys.
- The latest jobless claims data is for the week ending 13 June, and thus coincides with the Labor Department’s monthly employment survey. During that week, continuing claims fell by 767,000. That could be consistent with June employment rising by 500,000 or so – a much smaller gain than in May.
- The official jobless claims data excludes the special Pandemic Employment Assistance Programs; when these are included, the gross initial claims are about 33% higher, and gross continuing claims is 50% higher.
- In Chart 2, below, we compare the official unemployment rate with the continuing claims unemployment rate. Historically, the claims-related unemployment rate has been about 30-50% of the official unemployment rate because many people are ineligible for state unemployment insurance programs.
- But now, the claims rate matches the official unemployment rate. And when we add in people on the PUA program, the implied unemployment rate jumps to near 20%. The point being, recent labour market data bears little resemblance to historical norms.
- We’ve pointed out in a previous Macro Hive report that the May labour market report revealed that more than 5 million people dropped out of the labour force but want a job since the pandemic lockdowns hit in March. Many of them are probably receiving PUA benefits.
- As those people start looking for work and return to the labour force, the unemployment rate could rise, perhaps sharply.
- Bottom line: given the latest jobless claims data, we look for the June labour market report to come in on the weak side, with at best a modest improvement in employment and potentially a higher unemployment rate if people are able to re-join the labour force.
Over a 30-year career as a sell side analyst, John covered the structured finance and credit markets before serving as a corporate market strategist. In recent years, he has moved into a global strategist role.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)