More people in the United States are receiving unemployment benefits than at any other time since records began in 1967, a weekly employment survey revealed Thursday.
Claims for unemployment insurance continued soaring in the week ending Jan. 24, as 586k Americans filed for first-time claims. The ongoing surge in unemployment caused the number of people continuing to receive benefits to hit a new all-time high with 4.776 million people on the dole, breaking the record from November 1982.
The two components together highlight that gross hirings have slowed as abruptly as gross firings have risen, said Ian Shepherdson, chief U.S. economist at HFE.
"The net result of this is soaring unemployment, and we see no chance of this picture changing in the foreseeable future," he added, forecasting another 3 million net job losses in the first six months of 2009.
"The real story was continuing claims," added Eric Lascelles, senior economics and rates strategist at TD Securities. However, he advised not to get too excited by the record number, as there have been "notable changes in underlying eligibility" for claiming benefits.
"You'd expect them to be higher" because of this technical feature, he said, forecasting that initial claims will soon rise above 600k, while continuing claims could hit the 5 million mark.
From October to December, the nonfarm payrolls report showed the economy shed an average of 510,000 jobs each month. "Initial and continuing jobless claims together suggest that the payroll loss in January was probably about as large as this, said Abiel Reinhart at JPMorgan.
Market Reaction:
Released at the same time was new orders for U.S. durable goods, which was weak across the board, concluding 2008 with an almost 20% loss year-over-year.
The safe-haven U.S. dollar rose minutes after the two releases. The USD/CAD was up 0.0055 to 1.2166, after ticking as high as 1.2170 on the data. The euro was down 50 pips to 1.3115.
Risk aversion has been dominating markets since the U.S. House of Representatives passed an $819 billion economic stimulus plan proposed by the Democrats. The bill now moves on to the Senate.
Twenty minutes after the release, equity futures were threatening to halt a four-day streak of increases. U.S. equity futures were about 1% lower with contracts on the Dow Jones industrial average down 77 points to 8245, the S&P 500 down 10 points to 862 and the Nasdaq down 10 points to 1222.
In fixed income markets, 30-year futures contracts were down 15 ticks to 128-14.5 just before 9 a.m. EST, with 30-year yields up 3.7 bps to 3.460%. Benchmark 10-year futures were down 11.5 ticks to 123-15.5, and 10-year yields were up 2.9 bps to 2.700%.
At the forefront of the drop in bond prices are supply concerns rooted in the upcoming record-high $30-billion five-year note Treasury auction at 1 p.m. EST
By Patrick McGee, pmcgee@economicnews.ca, with contributions from Ryan Szporer and edited by Stephen Huebl
©CEP News Ltd. 2009