US initial jobless claims fall, ease worry of worsening market

Roughlu 1.5 million more people will join those who have been working in essential services from the 1st of May.
Roughlu 1.5 million more people will join those who have been working in essential services from the 1st of May.

Applications for unemployment benefits in the US 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 - the most in a month - 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 - the total number of Americans claiming ongoing unemployment benefits in state programs - declined to 18.1 million in the week ended June 27, compared with a median projection of 18.8 million.

US stocks were mixed at the open, while 10-year Treasury yields fell.

A recent easing in layoffs is a welcome respite for the U.S. labor market, but the threat of future job cuts looms large as companies deal with depressed demand and dwindling government support. Wells Fargo & Co., the largest employer among US banks, is preparing to cut thousands of jobs starting later this year and could ultimately eliminate tens of thousands of positions. United Airlines Holdings Inc. notified about half of its US workforce - some 36 000 employees - that their jobs are at risk after federal payroll aid expires at the end of September.

Job losses and unemployment rolls remain stubbornly high and labor-market gains may still be at risk of stalling in coming weeks. Several states - including Texas and Florida - have delayed or walked back reopening plans, and a cohort of rehired workers has found themselves out of work once again.

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 US 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.”

A separate report Thursday showed consumer confidence cooled for the first time in seven weeks amid the renewed outbreaks, raising the prospects of a tempering in the economic recovery.

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.

What Bloomberg’s economists say

“Jobless claims declined more than expected, but the signal may slightly underestimate the degree of strain in the labor market. ... Soaring virus cases present downside risks to the fragile recovery in the labor market.”
- Eliza Winger

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 US, 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.

- With assistance from Chris Middleton, Sophie Caronello and Maeve Sheehey.

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