Higher Jobless Claims Data Indicate Job Market Deterioration, Economists Say
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Economists say the higher-than-expected initial jobless claims reading for the week ending June 21 and four-year high reached in continuing claims illustrates the continued deterioration of the U.S. labour market.
Initial claims for unemployment benefits in the United States remained unchanged at 384k in the week ending June 21, following a slight upward revision to 384k in the previous week from an initially reported 381k, the Department of Labor reported Thursday. Forecasts were for initial claims to come in at 375k.
Continuing claims, however, rose to a four-year high of 3.139 million for the week ending June 14, against forecasts for a rise to 3.105 million.
"Three straight weeks of claims in the mid-380s is not good news; this is recession territory," said Ian Shepherdson, Chief U.S. Economist at HFE. He noted that claims will move higher over the next few weeks as the automakers start their annual retooling shutdowns and that a "big spike" is entirely possible due to the desperate state of the auto market.
"The bottom line here is that layoffs are rising as companies begin to realize that the credit-driven go-go days are over and aren't coming back," Shepherdson wrote in a client note. "Funnily enough, they don't seem much impressed by the Fed's view that downside risks have diminished. Claims, remember, lead growth."
This is the seventh consecutive week that continuing claims have been above the 3 million mark. The four-week moving average is now 3.096 million, down from the moving average of 3.096 million in the previous week.
Both the initial and continuing claims data "indicate that the jobs market continues deteriorate - hardly the type of situation in which the Fed would like to be raising rates," noted T.J. Marta, a fixed income strategist from RBC Capital Markets.
"These data support our view that the Fed will only be able to jawbone against inflation. Consequently, the short end of the curve should remain pinned while the long end leaks wider," he wrote in a client note.
Millan Mulraine of TD Securities said the report came as a "disappointment" to the markets because it suggests no let-up in the deterioration of the U.S. labour market. "Moreover, it also means that the decline in claims in the previous week may have been a temporary blip in an otherwise upward trend in jobless claims," he wrote.
By Stephen Huebl
©CEP News Ltd. 2008
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