U.S. initial jobless claims fall, ease worry of worsening market

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Applications for unemployment benefits in the U.S. declined last week by more than projected, easing concerns of a renewed downturn in the labor market after several large states reported a pickup in coronavirus cases.

Initial jobless claims in regular state programs fell by 99,000 一 the most in a month 一 to 1.31 million in the week ended July 4, Labor Department data showed Thursday. The median forecast in a Bloomberg survey of economists called for 1.375 million.

Continuing claims 一 the total number of Americans claiming ongoing unemployment benefits in state programs 一 declined to 18.1 million in the week ended June 27, compared with a median projection of 18.8 million.

U.S. stock futures and Treasury yields were little changed following the report.

The latest numbers indicate that firings have continued to ebb, though job losses remain stubbornly high and labor-market gains may still be at risk of stalling in coming weeks. Prior to a surge in new virus cases that prompted several states 一 including Texas and Florida 一 to delay or walk back reopening plans, employers were adding millions of Americans back to payrolls.

The reversal in policy has led a cohort of rehired workers to find themselves out of work once again. Initial claims for regular state programs remain about double the worst week in the 2007-2009 recession, indicating a distressing number of workers continue to get caught up in the economic fallout of the pandemic.

The high level of initial and continuing claims “provides a cautionary message about the difficulties involved and the time it will take to heal a labor market thrown into turmoil by unprecedented circumstances,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez, said in a note. “The road back to February’s peak employment levels will be a long and bumpy one.”

Without seasonal adjustments, state initial claims fell by a more-moderate 32,000 from the prior week. Of states that have seen a recent surge in outbreaks, California and Florida saw decreases in unadjusted initial claims from the prior week. Arizona was little changed, while Texas initial claims rose by about 21,000.

State Increases

Several other states reported significant increases in initial claims including New Jersey, Louisiana, Maryland, Nevada and Tennessee.

With the federal government paying an extra $600 in weekly unemployment benefits through the end of July, employers may be allowing some people to go back and forth between working and filing for benefits, which is “wreaking havoc on the data,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.

“I’m not really going to put a lot of weight on the claims numbers until after the $600-a-week benefit boost expires,” Stanley said.

Economists’ estimates of initial claims ranged from 1.2 million to 1.9 million. The data can be volatile in weeks around a holiday, and July 4 was Independence Day in the U.S., with the holiday observed on Friday.

On an unadjusted basis, continuing claims for state programs decreased by about 631,000 to 16.8 million.

In the week ended July 4, states reported 1.04 million initial claims for Pandemic Unemployment Assistance, the federal program that extends unemployment benefits to those not typically eligible like the self-employed.

The total number of unadjusted continuing claims in all programs rose to 32.9 million in the week ended June 20, though this figure likely reflects an overcount of reported PUA continued claims -- in some cases reflecting the number of retroactive weeks claimed rather than individual people.

Bloomberg News
Employment data Jobless claims Coronavirus Economy