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The coronavirus surge is starting to squeeze the U.S. job market: Morning Brief

Myles Udland
Markets Reporter

Friday, July 10, 2020

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Workers filing for Pandemic Unemployment Assistance are on the rise again.

The U.S. labor market is sending troubling signals that the resurgence in COVID-19 cases is weighing on the economic recovery.

On Thursday, the latest weekly data on initial jobless claims showed that while claims fell to 1.31 million for the week ending July 4, an increasing number of workers filed for Pandemic Unemployment Assistance (PUA) for the fourth straight week.

Last week, 1.04 million people filed PUA claims for the first time, an increase of 42,000 over the prior week and up from 880,000 two weeks prior.

“The news behind the headline numbers, which cover only regular state unemployment insurance programs, is disconcerting,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

“The number of people claiming for Pandemic Unemployment Assistance— PUA, which is aimed at gig workers, freelancers, the self-employed and other people who don't qualify for regular state programs—has increased in the past four weeks straight,” Shepherdson adds.

“This suggests that the renewed slowdown in the South and West...is hitting non-traditional workers harder than those in regular payroll jobs. Continuing PUA claims are now rising too, after falling in late May and early June.”

Jobless claims made under the Pandemic Unemployment Assistance program are rising as regular claims continue to fall, a sign that significant stresses still remain — and may indeed be rising — in the labor market. (Source: Pantheon Macroeconomics)

The number of workers filing continuing claims for unemployment insurance fell last week to 18.06 million, a positive sign for recovery in the labor market. But here again we see a more negative story when also counting those filing continuing claims under PUA instead of the traditional unemployment umbrella.

James Knightley, chief international economist at ING, said in a note Thursday that, “the total number of people claiming benefits under ALL programs rose to 32.9 million — up 1.4 million on the week. That is because a broader range of people qualify for benefits under the Pandemic Unemployment Assistance program which had 14.4 million claimants as of [the week ending] June 20.”

Knightley adds that this data, “only serves to illustrate the ongoing extreme stress in the jobs market and suggests unemployment is closer to 20% than the 11.1% currently listed as the ‘official’ rate.”

Last week, the June jobs report showed some 4.8 million jobs were added to the economy last month, a sign that employers did seem to be slowly but surely re-adding to their payrolls after a historic drop in March. And while the Nasdaq hit a record high on Thursday, the 10-year Treasury yield fell and bank stocks came under pressure as doubts about the durability of the spring’s strong economic rebound rise among investors.

And alongside this softening in data out of the labor market has come some less-than-stellar readings on the health of the consumer.

Credit card data from JPMorgan Chase updated Thursday revealed a plateauing in consumer spending over the last two weeks after a mostly unabated rise through mid-June once lockdown restrictions were eased and stimulus checks were sent to American workers.

“In data through Sunday, July 5, our tracker of spending by a panel of 30 million Chase credit and debit cardholders remains below its recent peak on June 22, and it appears to have flattened out at this lower level as COVID-19 spreads rapidly in some parts of the country,” the firm said Thursday.

Consumer spending has flattened out over the last few weeks, a sign that the strong recovery jump-started by consumers through the spring has started to stall. (Source: JP Morgan)

“This modest pullback in nationwide spending has not been driven by a sharp pullback concentrated in states where the virus has spread rapidly, but instead by modest pullbacks that are widespread across states. This pattern raises the concern that behavior has not changed enough to stem the spread of the virus in the hardest-hit states.”

All of which suggests it will be some time before anyone can say the coronavirus health and economic crisis is behind us.

By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland

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