Unexpected weekly jobless claims rose last week despite hopes that the US labor market is about to rebound strongly in the fall.
Initial jobless claims for the week ended July 17 totaled 419,000, well above the Dow Jones estimate of 350,000 and more than the previous period’s revised upwards of 368,000, the Labor Department reported Thursday.
The news sent stock market futures tumbling from their highs for the morning, with Wall Street pointing to a slightly negative opening price. Government bond yields also fell slightly.
The total unemployment rate was the highest weekly number since May 15 and was created amid expectations that the job profile will improve noticeably as expanded unemployment benefits end and companies become more aggressive in filling vacancies.
On the positive side, ongoing claims, a week behind the headline, have fallen 29,000 to 3.24 million, a new pandemic low. The total was last lower on March 14, 2020, shortly after the Covid-19 pandemic declaration and when US governments ordered businesses to shut down, sending more than 22 million unemployed.
The total number of beneficiaries of all government programs also fell by more than 1.2 million to 12.57 million. A year ago, almost 33 million people were receiving benefits.
Of the states, Michigan had the largest increase at a time when auto production derailed due to a semiconductor shortage, adding more than 13,000. Texas saw a nearly 10,000 increase, according to unadjusted data.
The surprising increase in claims over the past week can be attributed to increasing fears about the relatively new Delta variant of the coronavirus. The number of cases and hospital admissions are on the rise, especially among unvaccinated segments of the population, raising the specter that another wave of the disease is hitting the United States and the world.
New cases and hospital admissions are around mid-May levels, though they remain a fraction of the winter outbreak’s levels.
Despite the surprising surge in claims over the past week, several factors point to strong potential for imminent workforce gains.
Recruitment site Indeed estimates there were approximately 9.8 million open positions as of July 16. By comparison, the Department of Labor counted 9.48 million workers as unemployed as of June, suggesting ample opportunity for aggressive hiring.
Companies that closed during the pandemic are also returning at a rapid pace.
According to Yelp, 60,502 stores reopened between April and June, the highest volume of the past year. That total included 38,725 reopenings in April alone, the fastest monthly pace since May 2020.
Of those returns, restaurants and retailers make up the highest proportion, with more than 36,000 in the second quarter.
Correction: An earlier vision misrepresented the decline in persistent unemployment claims, which was last lower on March 14, 2020.
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