The ranks of the unemployed swelled yet again in the latest week, as a marginal improvement in weekly jobless claims provided cold comfort in a labor market battered by a relentless wave of COVID-19 infections.
The Department of Labor released its weekly report on new jobless claims Thursday morning at 8:30 a.m. ET. Here are the numbers compared to what Wall Street was expecting, according to consensus estimates compiled by Bloomberg:
Initial jobless claims, week ended Jan. 23: 847,000 vs. 875,000 expected, and an upwardly revised 914,000 in prior week
Continuing claims, week ended Jan. 16: 4.771 million vs. 5.088 million expected, and a downwardly revised 4.794 million in the prior week
Although jobless claims dipped unexpectedly, the high-frequency barometer of the labor market has hovered perilously close to the one million mark — a psychologically important barrier that hasn’t been breached since last year.
The weekly data have become a proxy for an economy that’s been buffeted by COVID-19, forcing many service-sector workers out of their jobs as Washington wages partisan battles over ways to backstop growth.
“The level of initial claims is obviously still way too high, but we are only a few more months away from hopefully seeing a sharp drop as more service businesses reopen as we get vaccinated,” Peter Boockvar, CIO of Bleakley Advisory Group, said in a research note.
“Likely also keeping it high is another round of generous federal benefits, as the extra $300 allows about 50% of people collecting claims to make more than what they were earning while working,” he added.
In the final months of 2020, growth faltered as skyrocketing infections prompted new restrictions on public life, new data showed on Thursday. Although the newly-inaugurated Biden administration has pledged a nearly $2 trillion stimulus, the plan isn’t expected to be debated and voted upon by Congress for weeks.
JPMorgan Chase economist Daniel Silver said last week that recent claims data “look consistent with some weakening in the labor market that is likely tied to an intensification of COVID-19 issues over the past couple of months.”
Continuing claims, a measure of the total number of individuals still receiving regular state unemployment benefits, have remained on a mostly steady downtrend since peaking at nearly 25 million in May. Yet pockets of weakness remain in several of the hardest-hit states such as Florida (+8,643), Maryland (+7,935), Kansas (+6,746), Ohio (+5,665), and Rhode Island (+2,998), according to Labor Department data.
Meanwhile, California — an epicenter of the U.S. outbreak — continued to show improvement, registering the largest drop in new claims, by 65,383. New York, Texas and Pennsylvania also posted a drop in claims, the Labor Department said.
However, the inability to control the outbreak, and the rocky start to the vaccine rollout, bodes poorly for first quarter growth, which economists were counting on to help put a helter-skelter 2020 in the rear view mirror. Growth hopes are riding heavily on the effort to mass vaccinate the public.
“This latest reading beat expectations and filings have now moved down in two straight weeks,” JPMorgan’s Silver said on Thursday.
Still, “the four-week moving average for initial claims kept drifting up through today’s report (now at 868,000), and we think that the labor market has softened over the past few months due to virus-related issues,” he added.
Javier David is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek