U.S.: Jobless claims confirm the recovery is continuing sluggishly

Macro

Christopher Dembik

Head of Macro Analysis

Summary:  The most important U.S. data of this week is out. We monitor very closely initial jobless claims and continuing claims as they are two of the best timely indicators we have on the U.S. economy despite the fact that data can be a bit noisy at the moment due to processing lags. There is still probably a high level of churn in the labor market through June and July.


U.S. initial jobless claims and continuing claims are out below consensus – which is rather positive considering the two prior weeks the market consensus was a bit too optimistic. Initial Jobless claims, which does not capture the rate of hiring and rehiring, declined from 1,41m to 1,31m last week (July 4). It is the 16th straight week in which initial claims are above 1 million.

Continuing claims, which represent the current number of insured unemployed workers filing weekly for unemployment insurance benefits, are reported with a two-week lag. In the week ending June 27, it was at 18,0m from 18,7m the prior week.

Looking at state level, initial jobless claims in America’s four largest state economies, that represent roughly 1/3 of U.S. GDP, are still at a very high level, at around half a million (548,159 in the week ending July 4). We notice a slight deterioration in the labor market in California and Texas where continuing jobless claims are increasing a bit, respectively at 2.9m and 1.3m, likely due to the fact that reopening has been put on hold or reversed.

The overall decline in jobless claims over the past weeks is a clear sign that the labor market is healing, but at a very slow path and many downside risks remain. COVID-19 cases climbing across the country (with a total of more than 3,0m confirmed cases and 132,309 deaths as of today) will probably lead in the coming weeks to further economic disruptions that has not been captured yet by today’s figures and might conduct to an increase in jobless claims in the coming weeks. The market needs to get ready to ugly labor market figures if the health crisis is not contained fast. In states where the health crisis is under control and where process of reopening has started, jobless claims are also likely to remain elevated at least until the end of this month, due to the very generous unemployment benefits put in place to cope with the lockdown and that expire in its current form on July 31.

Given the pickup in coronavirus cases, low consumer spending and the fact that the second economic wave characterized by business restructuring and permanent closures has barely started, we remain very careful regarding the evolution of the U.S. labor market. We fear that the worst may be yet to come for the labor market with a sharp rise in layoffs after the summer when businesses will realize that the economy is not going back to normal anytime soon.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract) and Type 3 Regulated Activity (Leveraged foreign exchange trading) licenses (CE No. AVD061). Registered address: Rooms 2001-02, 20/F York House, The Landmark, 15 Queen's Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.