Jobless claims rise as the recovery appears to be stalling

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After 15 straight weeks of slowly descending while remaining historically elevated, initial jobless claims grew in the week ended July 18, leading some analysts to suggest the U.S. economic recovery appears to be "stalling."

Claims edged higher to a seasonally adjusted 1.416 million from the previous week’s upwardly revised level of 1.307 million, originally reported as 1.300 million, the Labor Department said Thursday.

Economists polled by IFR Markets projected 1.300 million claims in the week.

Continuing claims fell to 16.197 million in the week ending July 11 from a downwardly revised 17.304 million, first reported as 17.338 million, a week earlier.

“The recovery appears to be stalling as jobless claims rose for the first time since March and as continuing claims remain elevated,” said Ed Moya, senior market analyst at OANDA. “Washington, D.C., will focus on the total number of claims which improved slightly to 31.8 million, likely keeping the pressure for the fiscal stimulus package to get done before the end of the month. The economy does not seem to be on sound footing anymore and with the high uncertainty with the direction of the coronavirus, businesses will likely struggle to justify hirings."

“This is clearly very disappointing news to see new weekly unemployment claims rise over the previous week to 1.4 million,” said Mark Hamrick, senior economic analyst at Bankrate. “The increase marks an end to the 15-week string of declining new claims. New claims have remained elevated, or above 1 million, for 18 straight weeks going back to late March. At the same time, it is not entirely surprising, given the severe extent of the continuing outbreak.“

In addition, he noted, about 975,000 claims were made “under the separate Pandemic Unemployment Assistance Program provided under the CARES Act,” he said. “Just as it has been heartbreaking to see the nation still struggling with the devastating and all too often deadly health aspects of the COVID-19 pandemic."

The states posting the largest rises in claims in the week ending July 11 were Florida (65,890), Georgia (33,292), California (20,123), Washington (16,116), and Indiana (6,258), while the largest declines were in Maryland (13,728), Texas (11,583), New Jersey (8,577), Michigan (6,882), and Louisiana (5,066).

Leading indicators
The leading economic index rose 2% to 102.0 in June, after a 3.2% increase in May and a 6.3% drop in April, according to The Conference Board.

Economists predicted an increase of 2.1% for the month.

“The June increase in the LEI reflects improvements brought about by the incremental reopening of the economy, with labor market conditions and stock prices in particular contributing positively,” according to Ataman Ozyildirim, senior director of economic research at The Conference Board. “However, broader financial conditions and the consumers’ outlook on business conditions still point to a weak economic outlook. Together with a resurgence of new COVID-19 cases across much of the nation, the LEI suggests that the US economy will remain in recession territory in the near term.”

The coincident index climbed 2.5% in June to 96.7, after a 1.6% gain in May and an 11.8% drop in April.

The lagging index fell 2.5% in June to 110.8, following a 1.2% slide in May and a 3.1% rise in April.

Kanas City Fed manufacturing
The Federal Reserve Bank of Kansas City manufacturing survey showed some expansion, but below year-ago levels. The composite index grew to 3 in July from 1 last month.

The production index rose to 7 from 2, while the volume of shipments index gained to 11 from 8 and the volume of new orders index improved to 9 from 7. The number of employees index rebounded to positive 3 from negative 6 in June. The prices received index slipped to 6 from 7.

Looking six months into the future, the composite index moved to 14 from 9. The production index jumped up to 25 from 14, while the volume of shipments index climbed to 21 from 12 and the volume of new orders index rose to 20 from 16. The future number of employees index rose to 11 from 8 and the future prices received index stayed steady at 13.

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Economic indicators Jobless claims Federal Reserve Bank of Kansas City Manufacturing industry