James Knightley, ING's Chief International Economist, notes that U.S. initial jobless claims remain elevated despite the decent activity backdrop.

"US initial jobless claims rose 4k to 870k for the week of September 19 versus expectations they would drop to 840k. Continuing claims moved down to 12.58mn from 12.75mn, not as good as the 12.28mn consensus. The total number of people claiming unemployment benefits (including pandemic unemployment assistance) dropped to 26.04mn from 29.77mn."

"This latter number is encouraging although we don't have any detail as to why it was such a big drop in the number of people claiming PUA. The total number of benefit claimants remains nearly double the 13.55mn “official” level of unemployment whereby to be “officially” unemployed you have to be actively looking for work."

"Given Covid-19 is far from beaten plus the fact that the supportive impact from the fiscal stimulus is fading, caution remains warranted. There are clearly ongoing strains in the jobs market – remember that the peak in initial claims during the Global Financial Crisis was 665k the week of March 27, 2009 so we are still 200k above that."

"There certainly is the risk of a renewed wave of cases in the US, particularly as the weather becomes more conducive to human transfer, so if renewed containment measures are introduced this will undoubtedly constrain business activity and hurt employment prospects. As such, calls for more fiscal help will only grow, but it is difficult to see a material package being agreed given election-related tensions in Washington."