Any data indicating the state of the labor market in the United States is important to currency traders due to the Fed’s mandate of maximum employment and price stability. In normal economic times, the Non-Farm Payrolls (NFP) is most-awaited, and complementary data throughout the month becomes secondary in importance.
The COVID-19 pandemic changed the way traders and investors collect and interpret data. Suddenly, a monthly interval (NFP is released on the first Friday of every month) is too long, and secondary data released throughout the week offers competent information regarding the impact of the health crisis on the labor market.
Initial Unemployment Claims is such data.
Another 1.4 Million Americans Filed for Unemployment Last Week
The market expected a lower number to confirm the declining trend registered in the last several weeks. However, the rate of job losses plateaued around 1.5 million a week, a terrifying number by all metrics.
What is interesting is that if we look at the details of the entire jobs market, not only that, there are no signs of improvement, but the outlook is grimmer. The continuing claims on all programs are close to their peak at the start of May and almost thirty million above where they were a year ago.
No less than 1.2 million claims part of that figure belong to a special program called Pandemic Emergency Unemployment Compensation (PEUC). These are benefits provided by the CARES ACT for thirteen weeks to people that already exhausted the regular state unemployment. More precisely, 1.2 million did not manage to find a job in the meantime. The danger is that if the crisis persists (as one would be inclined to think considering the spike in the rate of infections in the United States in the last week), the number of people becoming eligible for PEUC will increase considerably. Effectively, they will not appear in the regular continuing claims data, but under the PEUC.
For the labor market to show signs of improvement, the continuing claims should decline at a faster rate than the rise in initial unemployment claims. But if the decline in continuing claims is due to the people being “transferred” in other categories that offer assistance, then such decline is artificial and only masks the true state of the labor market.
Unfortunately, such a situation is common all over the world, not only in the United States. It shows the precarious times we are living in and how important it is for traders to be able to read the economic data accurately.