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Jobless Claims Hit New Pandemic Low

by Hector Demarco | September 2, 2021

What happened: The latest report from the Department of Labor showed that the number of Americans filing new claims for unemployment benefits fell 14,000 to 340,000 last week, matching market forecasts. The 4-week moving average – used to smooth out weekly volatility and discern longer-term trends – tumbled to 355,000, a drop of 11,750 from the previous week’s revised average.

2.7 million people continued to collect jobless benefits under regular state programs in the week ending August 21, and in the week prior to that, 12.19 million were receiving payouts under all federal programs.

Supplementary unemployment benefits will end this week: While the added payouts technically expire on September 6, workers will be receiving their last check on Friday, leaving an estimated 7.5 million citizens without any sort of unemployment-related income.

Private job creation missed expectations yesterday: According to numbers published by ADP, the private sector generated 375,000 jobs in August – 250,000 below consensus market forecasts. But the report has historically had a poor record in predicting non-farm payrolls – in July, for example, the ADP estimate was nearly twice as weak as the official print from the Department of Labor.

A strong August non-farm payrolls report is expected: Yesterday’s Purchasing Managers’ Index data showed an increase in new orders and output from US manufacturers, suggesting that the domestic demand and economic activity levels remain strong. The report also indicated that business confidence and backlogs of work increased in August, which should have given firms more incentives to expand their workforce (although businesses also reported that they found it harder to retain staff and find suitable candidates for open positions).

But some states may drag national statistics down: The pandemic continues to ravage less-vaccinated states – mostly located in the south-eastern part of the country. Louisiana is experiencing record hospitalizations, Florida is coping with a record number of average deaths per day, South Carolina is nearing a new peak in infections, and Mississippi’s number of new cases is at an all-time high. And, although some states have been able to accelerate the rollout over the past few weeks, the vaccine hesitancy movement remains strong, leaving many citizens vulnerable to infection.

Consensus estimates suggest that employers added 720,000 payrolls last month and that the unemployment rate ticked lower to 5.2 percent from 5.4 percent.

Meanwhile, China is fighting its own battles: The country’s Purchasing Managers’ Index featured a worsening in business conditions in August, as a COVID-19 flareup led the government to impose new social-distancing restrictions. New orders and output fell in the country, and suppliers’ production capabilities were diminished – causing further shortages of input materials. This was the first time that business conditions have worsened since April 2020, with the index hitting its lowest level in nearly 18 months. This is likely to put downward pressure on the global growth outlook and intensify the supply shortages and order delays that the US has been experiencing.

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