The other shoe is dropping

False positive

New jobless claims came in slightly above 1.3m for last week. Even though this is the lowest reading in four months, it’s still insanely high compared to the numbers pre-COVID. It’s also probably understating reality because the July 4th holiday weekend meant people had one less day to file claims. Continuing claims, which is a better barometer for unemployment, came in at 32.9m last week when including all the additional state and federal unemployment claims. That number is, unfortunately, 1.4m higher than the week before. 

Moral of the story: Shutdown 2.0 across many states is flowing through into the unemployment picture as Texas, Florida, and Georgia saw some of the highest weekly new unemployment claims. Claims aren’t falling as much as we would like because the generous unemployment benefits are disincentivizing people from returning to work. Those benefits run out at the end of this month, though, and I’m waiting to see how that impacts unemployment. 

The W-shaped recovery

There were 5.4m job openings reported in May, which is up about 400k from the prior month. This makes sense given many businesses were beginning to reopen. Employers like hotels, restaurants, healthcare providers (think dentists), and social service organizations hired the most people. 

Moral of the story: Looking at data for May seems silly given we’re in July and things change on a weekly (if not daily) basis. But given so many of the jobs regained in May were in industries that have had to dial back their reopening because of new cases, I’d expect the job openings to fall again when we see the June data. Not only that, but the possibility of a resurgence of cases might slow companies from truly start getting back to “business as usual,” which means slower job recoveries. 

Unrealistic growth 

ISM’s nonmanufacturing index (aka services index) soared to 57.1 in June from 45.4 in May. Again, makes sense given services (hotels, restaurants, healthcare) that started reopening. Not only is this the highest month-on-month increase for this measure, but it’s also above 50, which means it’s in growth mode. Unfortunately, this growth is being grossly overstated because the growth is just compared to the really garbage numbers we’ve been seeing the last few months. 

Moral of the story: Services sectors account for over 80% of employment, so an improvement here is definitely great to see and aligns with the jobs data being reported. We’ll see if this continues to rise or we see another downtick as the resurgence in COVID-19 cases pauses the beginning of the economic recovery. 

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