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US Initial Jobless Claims Edge Higher Again

Matt Eidinger November 19, 2020

Despite an impressive effort, new claims for unemployment insurance had trouble breaking below the 700,000 mark during the week ending November 14 as viral infections continue to set new records almost every day across the United States.

The US dollar barely budged on the news – taking a break from the seesaw back and forth financial markets have been witness to during the past two weeks. A bombardment of positive coronavirus vaccine news has been tempered somewhat by news of more than 150,000 new COVID-19 infections each day across the United States.

According to the report from the Department of labor jobless claims rose to 742,000 last week, an increase of 31,000 from the previous week’s revised level. States contributing the most to claims last week were Louisiana and Massachusetts.

Additionally, the data show continuing claims for the week ending November 7 fell more than 400,000 to 6.37 million – continuing the healthy downward trend of the past few weeks. Still, there were more than 633,000 extended benefits claims – nearly triple the figures from just two months ago. As a result, the improvement in continuing claims can be somewhat misleading and should be analyzed with some caution.

When regular, extended and pandemic related claims are all counted, there are still more than 20 million Americans receiving some form of government assistance as of the end of October – the most recent week for which data was collected.

Separately, the Federal Reserve Bank of Philadelphia reported regional manufacturing activity declined less than expected this month. As per the diffusion index, the November figures came in at 26.3 as opposed to the 22 expected by markets. Expansionary activity was evident in all areas from new orders to employment.

However, the diffusion index for future activity fell nearly 20 points this month – reflecting manufacturing manager’s softer expectations for growth over the next six months in the midst of rising COVID-19 infections and associated lockdowns. Most notably, the future employment index fell nearly 10 points from 45.7 last month to 36.2 in November – echoing similar weaknesses as today’s jobless claims data.

These sentiments were also echoed in commentary earlier this week from US Federal Reserve chair Jerome Powell, who cited rising coronavirus infections as the “near-term risk that we’re most focused on,” before stressing that more fiscal support is required to keep the recovery afloat.

However, at present, legislators operating during the lame duck session of congress remain incapable of agreeing on new stimulus measures as more localities across the United States go into lockdown. Taken together, this points to a struggling labor market with less optimistic prospects for consumer spending in the coming months and an economy that will likely struggle to tread water through the winter.

Matthew Eidinger
Market Strategist & Fintech Specialist