May 22, 2020

News in Charts: US labour market rout continues

by Fathom Consulting.

US initial jobless claims were 2.4 million in the week ending May 16. While that marks a steady deceleration from a peak of almost 7 million in April, they remain at levels that were historically unprecedented pre-COVID. Total initial claims since the beginning of the COVID crisis have now reached almost 40 million. That figure is more than one in ten Americans, and amounts to just under one in four of the civilian labour force as of February this year.

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As states re-open, simply tallying up the cumulative jobless claims figure will provide less of a steer on labour market conditions. This is because the jobless claims data do not account for those workers who are hired in any given week. A separate release shows the number of people who continued to make claims. This figure, which is provided with a lag relative to initial claims, should help to gauge whether net job gainers are outpacing job losers. So far, there is little sign that is happening. Continued claims rose by more than 2 million to 25 million, suggesting no net improvement in labour market conditions yet.

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There is reason to think the labour market will slowly improve in the coming months. Daily new cases remain elevated but appear to have stopped increasing. That has opened the door for individual states to announce easing measures. The resilience of US equity prices suggests investors are bullish about future economic activity despite current acute weakness. Signs of optimism can be seen too in the Philadelphia Fed’s survey of manufacturers. The overall index increased from very low levels, as did the employment sub-component. Most promising of all, however, was the sub-index that measures future general business activity (six months). This rose to 49.7 and is at levels not seen for more than two years. Respondents should eventually turn some of that hope into hires, perhaps helping to ease conditions in America’s badly bruised labour market.

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