U.S. Labor Market Recovery Lacks Momentum
Yesterday it was all about the jobs data in the United States. Because of the upcoming 4th of July holiday, the Non-Farm Payrolls (NFP) was released one day earlier – on a Thursday, instead of Friday.
The NFP comes out monthly, every first Friday of the month, and refers to the jobs created in the previous month in the United States, in all sectors, except for the agricultural one. But the NFP is not the only piece of economic data hinting at the state of the labor market. Every Thursday, Initial and Continuing Claims show the number of people applying for unemployment benefits in the previous week.
This week they were both released on the same day and at the same time. However, the data referred to two different things.
Thirteen Consecutive Weeks with Lower Unemployment Claims
The initial unemployment claims fell for the thirteen consecutive week, reaching 1.427 million in the week ending last Friday. If you put it this way, it is a staggering improvement from the almost 10 million people that applied from unemployment benefits in the first two weeks of the coronavirus pandemic.
However, considering that every week the US sends a million and a half people into unemployment, it is not a sign of economic growth – but weakness. Moreover, employment gains continue to be uneven. Race, and even gender, play an important role as the unemployment rate for Black, Hispanic, and white workers shows many discrepancies.
Another thing to consider is the fact that for the last three weeks, the number of people applying for unemployment benefits remains relatively stable – but elevated. The last four weeks averaged around 1.5 million people applying for unemployment benefits, and the question now is if the economy is able to recover so that the number declines from this level.
Also, the market expected a lower number (1.35 million), and it was disappointed by about a hundred thousand. Considering that the NFP stole the show, as the headline beat expectations, the disappointment from the initial jobless claims remained unnoticed.
Unfortunately, this week the continuing claims data did not accompany the initial jobless claims. It is only when we have the two pieces of economic data together, that we can draw a conclusion about the real number of people entering and exiting the labor market. Until then, we can only have an educated guess.