New jobless claims: a surprise to the positive side

New jobless claims: a surprise to the positive side

I have been paying particular attention to new jobless claims this year, as being the most important weekly economic datapoint to correlate with vaccination progress. My ultimate target for claims is an average of 325,000 or below, which would signify a return to normal expansion levels in the past 30 years.

Lasts week I wrote that “Unfortunately, that progress [in vaccinations] has largely stalled in the past month, and now new jobless claims appear to have stalled as well.”

For this week, at least, I was wrong – and am glad to be so if the positive trend lasts.

This week new jobless claims declined 51,000 to 364,000, a new pandemic low 10,000 below the previous low of 374,000 set three weeks ago. The 4 week average of claims also declined by 6,000 to a new pandemic low of 392,750. Here is the trend since last August:

By way of contrast, at the peak of the pandemic lockdowns in spring 2020, new claims were running 6 million to 7 million per week.

From late February into May, claims had trended down an average of roughly 100,000 per month. This had slowed to roughly 50,000 per month, and over the last 4 weeks, is only down about 35,000. This implies a much weaker employment report tomorrow for June than we saw in the March – May months.

Continuing claims, which are reported with a one week lag, and lag the trend of initial claims typically by a few weeks to several months, have only declined about 10% from roughly 3,750,000 over the past 3 1/2 months:

At least some of this decline *may* be due to many States’ termination of all extended jobless benefits due to the pandemic.

A long term perspective shows that these are equivalent to the worst levels of most previous recessions, or early in the expansions, versus at 2,000,000 or below later in strong expansions:

While I would like to believe that the good news is going to continue, there is no getting around that the “delta outbreak” has begun in the least vaccinated States of the Deep South and interior West, and is likely to follow an exponential scale over the next weeks and possibly months. 

So I continue to believe, as I first wrote three weeks ago, 

“I think we are going to see two tracks going forward from here, as near-normalcy does return to the more vaccinated parts of the country, while attempts to return to normalcy fail in the laggard regions.

And that implies at least a stall in the decline in new claims, and – I actually suspect – an increase, perhaps to about 450,000 per week or so.