James Knightley, Chief International Economist, notes that a pick-up in jobless claims underlines the economic pain from renewed Covid containment measures in many states.

"Today’s initial jobless claims data have shown another 1.416mn people lodging a new unemployment benefit claim the week of 18 July versus the consensus forecast of 1.3mn. We sensed the risks were skewed to the upside given the reintroduction of Covid containment measures in a number of states following a spike in cases. This has led to renewed shuttering of businesses in the hospitality industry with high frequency jobs data from Homebase (an employee scheduling software provider for small businesses) suggesting employment peaked in late June and has been drifting lower nationally ever since. This is the 18th consecutive week of a reading at or above 1.3mn, underlying the stressed situation in the labour market."

"Continuing claims dropped from 17.3mn to 16.2mn, which is a little more encouraging, but it comes with a week lag on the initial claims numbers and could certainly rise again. That said, for us, the key figure to watch is the number of people claiming benefits under ALL programs, which is up at 31.8mn as of the week of 4 July versus 32mn the week of 27 June (it comes with an additional week lag on continuing claims data). That is because an additional 14mn people receive benefits under the Pandemic Unemployment Assistance and PEUC programs that don’t qualify for state unemployment insurance benefits (only 17.2mn do) - people that left their last job voluntarily, students looking for a first job or people who didn’t work enough time or earn the minimum earnings to be eligible."

"Given the lags versus initial claims and the renewed containment measures and the data from Homebase we could certainly see the total number of benefits claims increase again in the next couple of weeks."