Another Bad Jobless Claims Report
Jobless claims report in the week of June 20th was terrible which means there have been 2 bad reports in a row. Specifically, the prior report was revised up from 1.508 million to 1.54 million. As you can see from the chart below, this week’s report showed claims fell to 1.48 million which was 100,000 above expectations.
That’s a huge miss and shows the labor market has hardly decreased in the past 2 weeks. Initial claims fell 1.7% last week and 3.9% this week. Many were hoping for a big beat this week to make up for the last one, but now that trend has changed.
It’s clear that the labor market can’t afford to stop improving this quickly. Weekly initial claims are still over double the highest reading ever. If the economy was trending in the wrong direction, we’d say this is a recession. Remember, the start of this recovery is worse than most recessions.
Investors are anticipating a weak labor report next Thursday. There were 728,000 PUA claims, which means the total was 2.2 million. On a non-seasonally adjusted basis, in the past few weeks total claims including PUAs have fallen 6%, 1%, and 2%. That’s an average decline of 3% which is terrible.
This was the week where continued claims match the BLS June survey week (June 13th). Continued claims fell from 20.289 million to 19.522 million. This 3.8% decline was better than the past few weeks. In fact, it was the best since the 16.3% decline in the last survey week. If you’re looking at this in numerical terms, the decline in last month’s survey week was 4.071 million and in this report it was 767,000.
All signs point to this BLS report showing weaker job growth than last month. This is surprising because most originally thought the May report would be terrible and June would be the first sign of life. Instead, the great report came a month early as people went back to their jobs.
Even though the June labor report is unlikely to include any impact from the renewed spike in COVID-19 cases, it will stil probably be weak. We need to look at the next few weeks of initial claims to see that impact. We’re just starting to see states such as Texas and Florida stop their reopening plans to deal with the virus.
Of the 4 states (Arizona, California, Texas, Florida) highlighted with COVID-19 problems, 3 had increases in initial claims. Only claims in Texas fell. It’s difficult to say if COVID-19 was a factor in these states. Even if it was, this report is outside the window of the June BLS reading.
COVID-19 Continues To Get Worse
On Wednesday, there was a record number of new cases in America as there were 40,184. As you can see from the charts below, the positive rate and hospitalizations have been increasing. The good news is the 7 day moving average of deaths fell from 624 to 609. Considering the fact that hospitalizations only just started to increase, I don’t expect deaths to increase until next week. I still don’t think the 7 day average will get anywhere close to the peak in April.
4 states we’ve been talking about doing badly for a couple weeks, had bad days again. There were 3,056 new cases in Arizona. 7 day average hit a record high of 2,798. There are 53,401 active cases. Worst state was Texas which had 5,960 new cases which brought the 7 day average to 4,927. 7 day average of deaths is 28 which is below the peak of 38. We can expect these cases to cause a new peak in the next week.
We had an unusual situation on Thursday in which reports of Houston hospitals not yet being near maximum surge capacity sent the stock market higher in the afternoon. Initially, there were reports Houston had reached its ICU limit which would be a disaster because there is no evidence this wave of cases in Texas is done.
Houston hospitals released a statement saying, “We realize that the letter issued by the Texas Medical Center yesterday afternoon caused unnecessary alarm. Our intent was to educate Houstonians and not alarm them about capacity, which is not an immediate concern.”
The graphic above shows the ICU bed capacity is at its normal limit, but it’s nowhere near the maximum surge capacity. Number of new cases would need to accelerate for a couple more weeks before it becomes problematic. It’s possible that as people in Texas become more cautious, the growth in new cases slows. The stock market would absolutely love for this situation in the south and the west to show signs of improvement.
Once again, the economy is not out of the woods yet. When the stock market was pricing in a depression, some were bullish. Now that it’s pricing in a full quick recovery, we’re more skeptical. As you can see from the chart below, there are still a lot of businesses listed on Yelp as closed that were open as of March 1st. 35% of the 27,663 shopping and retail closures were listed as permanent.
An amazing 53% of the 23,981 restaurant closures were permanent. Obviously, it’s possible these listings can be changed and some might be wrong. The caption indicates the data might lag actual closures because of the time it takes to report and verify the information.
Initial claims reading showed its 2nd straight week of a very small decrease. At this rate, it will take many months just to get below the previous record high let alone back to normal. COVID-19 is still a problem in a few states. Everyone is watching the data in Texas as a statement from Houston hospitals caused stocks to rally 1% in the afternoon. Yelp data shows more than half of new restaurant closures are permanent.
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