U.S. weekly initial jobless claims fall, to continue to slow down but stay at unprecedented levels for sometime

U.S. initial jobless claims for the week ended 9 May came in at 2.98 million, lower than the 2.17 million seen in the prior week. Today’s data was slightly higher than consensus expectations of 2.50 million; however, it is still at about half of its recent peak. The four-week moving average of claims is now 3.61 million. In all, the good news is that claims are retreating.

Another positive in today’s report is that only some of the states had recorded a rise in initial jobless claims over the week, led by Connecticut, New York, Florida and Washington. Meanwhile, the majority of states had either no change or modest falls in claims. Leading the fall were Texas, California and Oklahoma.

Continuing claims rose only modestly in the week ended 2 May to 22.83, one of the lowest weekly rises since initial claims started spiking. This might reflect several factors. Firstly, it might be an eligibility issue, where not everyone who files for unemployment insurance gets accepted. Secondly, it could be that many are getting off unemployment insurance as companies hire back previously furloughed workers. This might be the case in states that have begun to re-open gradually. And thirdly, the lagged rise in continuing claims might reflect backlogs in states where processing of several applications continue to be pending.

“We expect initial claims to continue to slow, but remain at unprecedented levels for several more weeks. While many states are taking steps to re-open, most are proceeding only gradually, with plans to open sections of the economy in a phased manner, which could lead to a slow re-hiring rate. In addition, many states will remain under stay-at-home orders until at least mid- to late May, which could keep rates of job separation elevated”, added Barclays.