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US Initial Jobless Claims Surge as Restrictions Intensify

Adam Corbett January 14, 2021

The Department of Labour saw 965,000 individuals file for unemployment benefits for the first-time last week, much higher than the street consensus of 785,000 and an increase of 181,000 – or about 24% – from the previous week’s revised level.

Continuing claims increased more than 200,000 since last week, with 5.271 million continuing to receive benefits against a forecast of 5 million.

This marks the highest reading since August, as new and stricter lockdown measures force even more to vacate the labour market. Today’s data reflects a reversal in the modest downward trend we had when restrictions were less pervasive.

No doubt a new stimulus package, expected to be revealed by President-elect Joe Biden later today, will address this increase and attempt to provide more support to the unemployed.

Despite the large miss, there was a muted impact on currency markets. As we’ve seen so frequently over the last 12 months, headlines fueled by President Donald Trump are the main driver, with impeachment headlines plastered across most major news outlets this morning.

The reading measures the number of individuals who filed for unemployment insurance for the first time during the past week and is the earliest labour market reading as it changes week to week.

During the pandemic, market participants have leaned heavily on the weekly jobless claims data in order to find an edge on how resilient the job market is. As we know, the US consumer contributes just shy of 70% of the nation’s GDP. If consumers are not generating income, they cannot spend as much, and the onus tends to rest on government to pick up the slack.

As a final thought, the US economy is still about 9.8 million payrolls short of where it was in February, the month just before the Covid crisis prompted an abrupt shutdown.

Coupled with an elevated unemployment rate and depressed labour force participation rate, economists are bracing for a multi-year recovery in the labour market.

The question to ask oneself relates to the notion of “new normal” and how these new conditions create opportunities for those currently unemployed. To quote Henry Miller, “One’s destination is never a place but rather a new way of looking at things.”

Adam Corbett
Business Development Manager, Canada & Currency Analyst