Weekly Unemployment Claims Improving But Doubts Remain

HEDGEYE FINANCIALS WEEKLY LABOR MARKET READING

Initial unemployment insurance claims (SA), filed in the week ending August 7th, were 963K, down -19% w/w. Cumulative initial claims have now hit 56 million, although this includes a fair amount of duplicate filings and over-counting on both the state and PUA levels.

Pandemic Unemployment Assistance (PUA) claims filed in the week ending August 7th were 489K, down -26% w/w. Recall, PUAs are part of the CARES Act and cover workers ineligible for traditional state UI assistance, including independent contractors, self-employed individuals, and others as detailed in the CARES Act.

Given the unprecedented speed with which initial claims have manifested, our view remains that the best way to contextualize the magnitude of the labor market crisis is to look at continued claims. Continued unemployment insurance claims (SA), the total number of people claiming benefits in all programs for the week ending July 31st, 2020, were 15.5 million, down -3.8% w/w. Continued claims of 15.5 million are currently ~2.43x the previous high-water mark of ~6.6 million set during the financial crisis. 

While declines in initial state and PUA claims are a welcome development, the improvement in continuing claims remains underwhelming. Although enhanced benefits, which had expired at the end of last month, have been re-implemented at reduced levels by executive order, disbursement is expected to be further delayed by the implementation challenges associated with such a transition. 

Moreover, the downward trend in PUA claims, while positive at face value and when taken isolation, suggests a shift away from temporary, virus-related job loss to more permanent job loss in other industries. As a result, we continue to express doubts regarding the size, speed, and nature of the employment recovery.