After 22 weeks, initial claims for unemployment benefits have finally fallen below 600,000. There were 565,000 new filings in the week ending July 4, the lowest weekly number since January and a much softer figure than expectations for 610k claims.
“In all likelihood, the shortened week due to the July 4th Independence Day celebrations likely led many employers to not hand out pink-slips, in addition to the fact that auto layoffs earlier in the year precluded the need for seasonal auto shutdowns that usually fall around this time,” said TD strategist Ian Pollick.
To avoid week-to-week volatility in the numbers, analysts often look to the 4-week average. This week that average slipped 10k to 606,000.
In contrast to that good news, the number of people continuing to receive unemployment benefits soared to 6.883 million, a new record high, in the week ending June 27, which is more than double compared to the reading one year ago.
Such an increase in continuing claims implies companies are failing to create new jobs as they cut expenses to maintain profit margins, this should temper any optimism based on the headline initial claims figures.
Looking ahead, economists at RDQ stressed that volatility in the labor market will be such a factor in the coming weeks that little can be read into any of the numbers for the next three weeks, in particular because of the state of auto manufacturing.