US jobless claims fall to lowest point since lockdown

First-time claims for unemployment aid in the US hit their lowest point since coronavirus lockdowns began in mid-March, reflecting changes to methodology and a slow recovery for the labour market.

There were 881,000 initial jobless claims on a seasonally adjusted basis for the week ending August 29th, the US Department of Labor said on Thursday. That was lower than economists’ forecast of 950,000 claims, signalling the slow pace of improvements in the labour market nearly six months after the pandemic first hit the US economy.

Claims had hovered at more than 1 million the previous two weeks, after briefly dipping below that level earlier in August for the first time since lockdowns began.

Fluctuations

The labour department changed the methodology it used to address seasonal fluctuations and reduce distortions in the weekly data, which partly explains the drop-off in claims. Under the previous method the latest figure would have stood at 1.02 million, according to Ian Shepherdson, economist at Pantheon Macroeconomics, “so the difference is quite large, and favourable”.

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The federal Pandemic Unemployment Assistance programme, which extends aid to the self-employed or those who would not qualify for regular unemployment compensation, had 759,482 new claims on an unadjusted basis. That was up from 607,808 the previous week.

Meanwhile, the number of unemployed people actively collecting jobless aid eased for a fifth consecutive week. Continuing claims dropped to 13.3m from 14.5m for the week that ended August 22, compared with economists’ forecast for 14m.

Thursday’s report showed there were 29.2 million people claiming benefits in all programmes, including PUA claims and other extended benefits, as of August 15th, an increase of 2.19 million from the previous week, according to unadjusted figures that are reported on a two-week delay.

The so-called insured unemployment rate, considered an alternative measure of joblessness, slipped to 9.1 per cent of the workforce, down from 9.9 per cent.

“The data show that lay-offs remain widespread and the recovery in the labour market is occurring at a frustratingly slow pace,” said Nancy Houten, economist at Oxford Economics.

Drop

She added that despite the sizeable drop in continuing claims they remained “more than twice the peak of the Great Recession”.

The recovery from the coronavirus pandemic has been bumpy for the labour market and the broader economy. A separate report on Thursday showed the July US goods and services trade deficit surged 18.9 per cent month on month to $63.6bn - its widest since 2008, as imports and exports rebounded after an easing of coronavirus lockdowns.

The US services economy weakened slightly this month. The Institute for Supply Management’s non-manufacturing activity index slid to 56.9 from 58.1 in July. A reading above 50 indicates the services sector economy is generally expanding.

The components of the report showed that new orders softened, and while employment improved somewhat, it still contracted for a sixth consecutive month. The data signalled how the pandemic was continuing to constrain the vast services sector, with growth set to continue at a slow pace.

Of the millions of American workers furloughed or laid off when coronavirus lockdowns began in the spring, only a fraction have recovered their jobs. Friday’s non-farm payroll report is expected to show the US economy created just 1.4m jobs in August.

Rebound

The spread of coronavirus in the American south and west over summer hindered the economic rebound. US GDP contracted at an annualised rate of 31.7 per cent in the second quarter, the most in postwar history.

More than a month after certain key benefits in the Cares Act expired, Congress has still not agreed on further stimulus for the economy.

President Donald Trump last month took executive action to divert $44bn in disaster relief money to help replace part of the $600 a week in federal unemployment benefits that expired in late July. Of that amount, only $2.6bn had been spent as of September 1st. The White House has also authorised a payroll-tax deferral plan to aid American workers, but many employers have balked at the plan.

US stocks retreated from record highs with the S&P 500 down 3 per cent on Thursday. Treasuries rallied with the yield on the US 10-year down 0.02 percentage points to 0.628 per cent. – Copyright The Financial Times Limited 2020