WASHINGTON (Reuters) – The number of Americans filing new jobless claims hit a two-month high last week, a reminder that the job market was far from out of the woods as the country shrank. facing a resurgence of new COVID-19 infections.
Still, the Department of Labor’s weekly jobless claims report on Thursday showed more people are returning to work, a trend that bodes well for the July jobs report. The Delta variant of the coronavirus is behind the latest outbreak, with states with low vaccination rates being the most affected.
The increase in jobless claims this week tells us that labor market woes are not completely behind us and that the Delta variant could yet lay a wrench in economic recovery after the shortest recession in US history, a said Christopher Rupkey, chief economist at FWDBONDS in New York.
Initial claims for state unemployment benefits rose from 51,000 to 419,000 seasonally adjusted for the week ended July 17, the highest level since mid-May. Data for the previous week has been revised to show 8,000 more claims than previously reported. Economists polled by Reuters had forecast 350,000 candidates for last week.
There have been large increases in deposits in Kentucky, Michigan, Missouri, and Texas. Some of those states have seen an increase in the number of new coronavirus cases.
While economists don’t expect large-scale business closures similar to 2020, the latest wave of infections poses a risk to the economy. The National Bureau of Economic Research’s Business Cycle Dating Committee said on Monday that the pandemic recession, which began in February 2020, ended in April 2020.
Part of the increase in claims likely reflects difficulties smoothing data for seasonal fluctuations in the wake of the upheaval caused by the pandemic. In normal years, layoffs are generally expected to decrease in the second half of July. Before the pandemic, summer plant closures were the norm in early July, especially in the auto industry.
The four-week claims average, considered a better measure of labor market trends because it eliminates weekly data volatility, only increased from 750 to 385,250.
We need to filter out the noise in the data points and not lose sight of the big picture – that the trendline continues to decline, said Anu Gaggar, senior global investment analyst at the Commonwealth Financial Network at Waltham, Massachusetts. There has been some distortion in the data and consensus expectations regarding the annual retooling shutdowns from automakers that will make their way through the system over the next few weeks.
(Graph: Unemployment claims:)
Claims have declined from a record 6.149 million at the start of April 2020, although they remain above the 200,000-250,000 range which is considered consistent with healthy labor market conditions.
While other data on Thursday showed a rebound in second-hand home sales in June after four consecutive monthly declines, the pace was moderate as rising prices and low inventory levels remained constraints.
Stocks on Wall Street were mixed. The dollar was little changed against a basket of currencies. US Treasuries were higher.
(Graphic: Sales of existing homes:)
NON-USED ROLLER SHRINKAGE
Last week’s claims data covered the period in which the government polled business establishments for the non-farm payrolls component of the July jobs report. Requests changed little between the June and July survey periods.
The economy created 850,000 jobs in June after adding 583,000 in May. Employment is 6.8 million jobs below its peak in February 2020. Claims data has been clouded by the extension of federal government benefits to people who do not qualify for regular programs. State. People must apply for state programs to determine eligibility for federal benefits.
But the unemployed are returning to work. The claims report showed that the number of people continuing to receive benefits after a first week of aid fell from 29,000 to 3.236 million in the week ended July 10, the lowest level since the start of the pandemic.
So-called continuous claims, which are reported with a one-week lag, have been declining since the end of June, and next week’s data will provide more clues to the evolution of hiring in July.
At least 20 states led by Republican governors have pulled out of federally funded unemployment programs, including a weekly payment of $ 300, which the companies say encouraged unemployed Americans to stay at home.
There was a record 9.2 million job postings at the end of May. About 9.5 million people are officially unemployed.
The evidence is mixed as to whether the early termination of federal benefits, which began on June 12 and will run until July 31, encourages job searches. Extended benefits will expire on September 6 for the rest of the country.
Continuing claims have declined in some states that have ended federal benefits as well as in those that remain on programs. They have also increased in some states that prematurely ended the extended benefits. Texas saw a big increase during the week ended June 10.
We expect the downward trend in continuing claims to accelerate as supplementary benefits end in all states in early September and other constraints on labor supply, including a lack of child care, will ease, said Nancy Vanden Houten, chief US economist at Oxford Economics in New York. However, the latest increase in coronavirus cases may make some people more reluctant to return to work.
At least 12.6 million people were receiving benefits under all programs in early July, down 1.263 million from the end of June. The latest resurgence in coronavirus infections could sharpen criticism from states that have ended federal benefits.
Businesses in hard-hit areas could be forced to scale back operations and cut jobs if further restrictions are needed, said Andrew Stettner, senior researcher at the Century Foundation. What will happen to the nearly four million workers whose unemployment benefits have been cut off prematurely?
Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci
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