During the COVID-19 pandemic, the initial jobless claims, and continuing claims in the United States, released every Thursday for the previous week, replaced in importance the ADP and NFP monthly data. The data offers an early view of the dynamics in the labor market.
This week another 1.4 million Americans filed for unemployment benefits. The market expectation was that the number of jobless claims would rise only by 1.3 million, but the outcome was 1.416. It is the first increase in sixteen weeks, showing difficult times for the labor market in the United States.
Continuing Claims Not Helping
The key to understanding initial jobless claims data is to compare it with the continuing claims. The former reflects the number of people exiting the job market and applying for the first time for unemployment benefits, while the latter refers to the number of people unable to find a new job and keep relying on unemployment benefits.
If the continuing claims decline more than the increase in initial claims, that is positive – more people are entering the job market than exiting it.
Two things are worth mentioning when interpreting the initial and continuing claims in July. First, the seasonally adjusted data. It tends to push the initial claims down at the start of the month but then reverses towards the end of. Therefore, it may be that the increase seen this week is due to the seasonal adjustment rather than the situation in the field.
Second, the continuing claims beat expectations this week, as they dropped more than expected. However, the drop was not enough to offset the decline in initial claims. Moreover, a cleaner measure for continuing claims should not include the biweekly reporting cycle in some American states. If we smooth that out from the data released yesterday, the outcome differs substantially (233k vs. 930k reported). In other words, worse than expected claims data this week, something to worry about moving forward towards the US elections in the fall and after four months of COVID-19 pandemic.
One aspect to consider moving forward is the type of jobs lost so far. They belong to sectors in the first line, affected the most by the pandemic – tourism services, for instance. But as the pandemic drags, as it does, white-collar jobs are next in line. When large corporations in the United States start laying off white-collar workers, those jobs are difficult to replace during the health crisis.