Initial jobless claims were higher than expected with 417k claims for the week ending 20 August. The previous week’s number was revised up a touch to 412k from 408k. Initial claims have been reported at or above 399k for 20 straight weeks now. A sustained sub-400k reading for jobless claims would generally be associated with a level consistent with a decline in the unemployment rate; however we look to be headed in the wrong direction. The 4-week moving average is now at 407.5k, up from the 403.5k a week earlier. The Verizon dispute did skew the report by adding 8,500 claims to the week of August 20th, and 12,500 to the week prior, according to the Labor Department. However, even taking this factor out, jobless claims would still have topped market expectations by a tick. Notably, employment indicators are a lagging indicator and we are not likely to see a spike in claims in the near-term. Moreover, given that many firms are already quite lean, having trimmed the excess labor during the last recession, we expect this recession to bring about much more muted claims and employment reports.
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BNP Paribas
Corporate & Investment Banking