New jobless claims unexpectedly steadied below 800,000 at the turn of the new year but still held at a historically elevated level, as the labor market struggled to regain traction amid the ongoing pandemic.
The U.S. Department of Labor released its weekly report on new jobless claims Thursday morning at 8:30 a.m. ET. Here were the main results in the report, compared to consensus estimates compiled by Bloomberg:
Initial jobless claims, week ended Jan 2: 787,000 vs. 800,000 expected and a revised 790,000 during the prior week
Continuing claims, week ended Dec. 26: 5.072 million vs. 5.200 million expected and a revised 5.198 million during the prior week
The labor market saw back-to-back weeks with new jobless claims below 800,000, following three consecutive weeks above that level in December. Last week, some economists attributed the improvement to a quirk in adjusting for seasonality factors around the holidays rather than the start of a down-trend, given the weakness displayed throughout the month in the labor market.
Even after the past three straight weeks of declines in new claims, the job market remains heavily pressured by the pandemic.
“The underlying story here is clear. A combination of COVID fear and state-mandated restrictions on activity in the services sector is squeezing businesses, and no real relief is likely until a sustained decline in pressure on hospitals emerges,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in an email Thursday. “That’s probably a story for late February at the earliest.”
By state, Colorado and Kansas reported the greatest increase in new claims last week, with these rising by more than 18,800 and 15,000, respectively. Illinois saw by far the greatest drop in new claims with a decrease of nearly 63,000, followed by Florida with a drop of 5,000.
Continuing claims, measuring the total number of Americans still receiving state unemployment benefits, also improved more than expected to nearly 5.1 million during the last full week of December.
And alongside those counted as continuing claimants, an additional 4.5 million Americans were also claiming benefits on the Pandemic Emergency Unemployment Compensation program, which offers extended insurances for those who exhausted their six months of regular state benefits. The passage of Congress’s $900 billion virus-relief package extended both Pandemic Emergency Unemployment Compensation and Pandemic Unemployment Assistance — which had nearly 8.4 million claimants as of late December — until at least March.
The Labor Department’s latest jobless claims report comes a day before the agency’s monthly non-farm payrolls report. The most recent weekly unemployment claims reports will not be reflected in the monthly data, given that the survey week for the report takes place around the 12th of the month. Concerningly, however, new jobless claims during the survey week spiked to a three-month high of nearly 900,000.
ADP’s closely watched monthly release on private sector employment already disappointed for December. That report showed the first negative private payrolls print since April, as new lockdown measures weighed most heavily on leisure and hospitality employment. Though ADP’s results have been an imperfect indicator of employment changes reported in the Labor Department’s monthly non-farm payrolls print, it has typically aligned at least directionally with the government report.
Though consensus economists still expect to see the Labor Department’s official non-farm payrolls print reflect modest net payroll gains for December, some individual economists are forecasting declines.
“Momentum has weakened in recent months, a trend that will likely persist in the near term,” High Frequency Economists economist Rubeela Farooqi said in a note Wednesday. “Risks to the labor market are skewed to the downside from a deteriorating health backdrop that will impact business activity.”
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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