The number of U.S. workers filing for unemployment last week was lower than in the previous two weeks and below what economists had expected.
Nearly 1.2 million people filed for unemployment benefits during the week ending August 1, the U.S. Department of Labor reported today. That an improvement of 249,000, or 20.75 percent, on the previous week’s number.
The number of workers filing continuing claims also decreased, to 16.1 million, 849,000 less than the week before. The $600 per week unemployment supplement under the CARES Act expired at the end of July.
On Tuesday, U.S. Senate Majority Leader Mitch McConnell (R-KY) told reporters he is “prepared to support” a resumption of the $600 enhanced unemployment checks, which President Donald Trump also supports. Senate Republicans are less enthusiastic about the proposal because it causes some people to receive more money in unemployment than they would if they returned to work.
In a pessimistic AP story, Paul Wiseman leads with the raw number, without any comparison to the past, and immediately brings up the political argument over the emergency unemployment supplement:
“Nearly 1.2 million laid-off Americans applied for state unemployment benefits last week, evidence that the coronavirus keeps forcing companies to slash jobs just as a critical $600 weekly federal jobless payment has expired,” the AP writer states.
Much of the story concentrates on the supplement payment, including quotes from a couple of unemployed people worried about meeting their expenses.
The one expert quote in the story comes from Rubeela Farooqi, chief U.S. economist at High Frequency Economics, and it moves quickly to pessimism after characterizing the week’s unemployment numbers as “a move in the right direction”:
“Repeated shutdowns for virus containment remain a threat to the labor market, which is already weak,” the story quotes Farooqi as saying. “The possibility of mounting layoffs that could become permanent is high. Without effective virus containment, the recovery remains at risk from ongoing job losses that could further restrain incomes and spending.”
Writing at Seeking Alpha, market analyst Tim Worstall argues that the numbers that are not adjusted for seasonal variations are a better measure of the current situation given the black swan character of the coronavirus lockdowns. Worstall quotes today’s U.S. Department of Labor report on the unadjusted numbers, which identified a big decrease in unemployment over in the past week:
“The advance unadjusted insured unemployment rate was 10.8 percent during the week ending July 25, a decrease of 0.7 percentage point from the prior week,” the Labor Department report states. “The advance unadjusted number for persons claiming UI benefits in state programs totaled 15,849,488, a decrease of 965,711 (or -5.7 percent) from the preceding week.”
“We’ve a million a week coming off the unemployment rolls,” Worstall writes, noting that the widely quoted payroll processing company ADP has been “telling us that the workforce is only rising by 160k a month.”
If ADP’s numbers are correct, Worstall notes, it means that millions of people are suddenly leaving the workforce permanently, which would be disastrous for the long-term prospects of the economy:
“We’ve two numbers so far,” Worstall writes. “ADP says number in employment went up 160k. The unemployment numbers say that millions a week are coming off unemployment. If they’re not going back to work then they must be exiting the labour force. Near 4 million doing that in a month is an earthquake. It could even be happening. But I think the more likely result is that the ADP numbers aren’t all that accurate at present.”
The monthly employment reports, scheduled to be released tomorrow, should clarify the matter, Worstall says:
“The changes going on are so large scale that the more normal proxies just aren’t working.
“Thus I’m cheerful about the fall in unemployment and regard it as evidence of a relatively swift bounceback. This makes stock markets about correctly priced.
“The contrary view here is that unemployment is falling because people are leaving the labour force. This would be a permanent impairment of the ability of the economy to grow. We’ll see whether this is true or not with the next official releases.”