One Third Of US GDP At Standstill

Jobless claims in the week of June 27th showed another poor result. At this rate, it will take months to fall to the previous record high. In the past 3 weeks, seasonally adjusted initial claims fell 1.7%, 3.8%, and 3.7%. If claims fall 3.7% each week, it will take 10 weeks just to get to below 1 million. The labor market is hardly getting better. The record high in March 2009 was 665,000. It would be a disaster for claims to stay above 1 million for 10 more weeks. The recent weakness could be related to the spike in COVID-19 cases. The number of deaths per day doesn’t need to increase for the economy to be disrupted. Hospitalizations have been increasing. That’s enough to get states to slow their reopening plans and for people to stay indoors. In this week’s report, California had the biggest increase in claims, while Kentucky and Oklahoma had the biggest decreases.  

Numerically, initial claims in last week’s report were revised up from 1.48 million to 1.482 million. Non-seasonally adjusted claims, including PUAs, were up 5% in the week of June 20th. As you can see from the chart above, the recent trend in this calculation is stabilization rather than improvement (using the past 4 weeks). In the week of June 27th, seasonally adjusted initial claims fell to 1.427 million which was worse than estimates for 1.4 million. There were 2.3 million total non-seasonally adjusted claims as PUAs only fell 42,000 to 839,000.  

Continued claims were also elevated. In the week of June 20th, continued claims were up from 19.231 million to 19.29 million which was the first increase since May 23rd (4 weeks ago). On a monthly basis, continued claims fell 11% which is much better than the 29% increase in May. The weakening trend is still in its beginning stages. The weakness might be the combination of the initial boost after the reopenings ending and the increase in new COVID-19 cases in the south and west shutting those economies down. Interestingly, the states with spikes in COVID-19 cases (California, Florida, Texas, Georgia, and Arizona) combined are 34% of America’s GDP. About a third of the economy is headed towards a standstill.  

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