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The weekly jobless claims report showed on Thursday the lowest levels in a year, with initial claims below 700K for the first time since the pandemic. Analysts at Wells Fargo argue that while the ranks of beneficiaries remain staggeringly high at 19 million, the unemployment benefits flowing to these individuals is just another example of the significant income support to households this cycle that has kept consumer spending relatively buoyant.

Key Quotes:  

“The direction and magnitude of weekly claims continue to hold clues about the recovery. To that end, claims tumbled by 97K to a 52-week low of 684K. The sharp drop came on the heels of an unexpected and upwardly revised figure of 781K the prior week. Through weekly volatility, however, the trend remains firmly, albeit slowly, downward. The four-week moving average fell by 13K to hit a fresh cycle low.”

“While this week’s claims figures show conditions improving, the initial damage brought on by COVID lingers. About 4.5 million individuals continue to collect regular unemployment insurance, while another 6.6 million are collecting extended benefits, including through programs such as the Pandemic Emergency Unemployment Compensation program.”

“Despite 9.5 million fewer jobs in the economy since COVID, “labor” income, including the value of unemployment benefits, is up 4.8% since February of last year.”