Bad Pre-Holiday Economic Data

Early Jobless Claims

Because of the Thanksgiving holiday, jobless claims came out a day early, and they were terrible. This is the 2nd week of bad numbers which signals the labor market is getting worse because of COVID-19. This won’t be a double-dip recession. But December will be a bad month for the economy. 

Last week’s seasonally adjusted initial claims were revised up 6,000 to 748,000. Claims in the week of November 21st rose to 778,000 which was above estimates for 730,000 and only 2,000 below the highest estimate.

We couldn’t call this a major problem, but it signals the labor market will get worse before it gets better. The main two questions are the following: 1) how bad will it get? 2) when will it start getting better? One guess is seasonally adjusted initial claims rise above 900,000 this winter. 

Secondly, claims will start falling again in March. We could have 3 months of weakness. However, once the vaccines are given out, we can expect a full recovery in the labor market.

(Click on image to enlarge)

As you can see from the chart above, non-seasonally adjusted initial claims and PUAs were up 7%. That’s the 2nd week straight they rose. There was a 4-week streak late in the summer. We can expect this run to be worse because the COVID-19 crisis is worse and government support is scant. 

At least late in the summer, we had $300 in additional pandemic unemployment benefits. Now we have a strong chance of all the pandemic benefits expiring on December 26th.

Specifically, non-seasonally adjusted jobless claims rose from 749,000 to 828,000 which was the highest since October 10th. We had the combination of initial claims and PUAs increase in the worst way as PUAs actually fell. Remember, PUAs are rife with fraud which means an increase is probably not a huge deal. 

PUAs fell 8,000 to 312,000. At one point in September, there were more PUAs than regular claims. That is no longer the case which means the combination is more impacted by regular claims now.

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