Unemployment numbers came in better than expected with 787,000 initial claims, below the 800,000 expected, a decrease over last week’s.
“In one line,” Pantheon’s Ian Shepherdson wrote, “Still bad, but at least they’re not rising.”
After a horrifying 2020 that saw initial jobless claims soar well into the millions, this week’s number may seem comparatively low. In context, however, it’s worse than the worst of the financial crisis.
“Claims near 800,000 per week are still far too high; the single worst week after the crash of 2008 saw claims at 655,000,” Shepherdson wrote.
MUFG’S Chris Rupkey stressed that “the recession in the labor markets isn't over yet and hardship remains for millions of Americans without paychecks.”
“The economy is still stuck in a ditch,” he added, “and not getting any traction as far as the unemployed Americans are concerned as the Washington transition is set to start.”
A surprise, but a clear underlying story in the labor market
One possible reason for the surprise “good” news comes from Homebase, a payroll-tracking platform used by employers and provides economists with quick economic data to take the temperature of the labor market.
Shepherdson noted that the Homebase platform showed a decline in employment, which does not line up with the claims numbers. Explaining this, he wrote, could either be the fact that Homebase might not be as representative of the market as previously thought, or more noise in the jobs market after the holiday period.
Still, Shepherdson added, “The underlying story here is clear.”
“A combination of COVID fear and state-mandated restrictions on activity in the services sector is squeezing businesses, and no real relief is likely until a sustained decline in pressure on hospitals emerges,” he wrote.
That relief will probably come in late February at the earliest, he said.
Better data will also likely be delayed, as data without holiday period distortions comes in mid-January.
“In the meantime, our take on the seasonals points to a hefty jump in claims next week, we look for 850-to-900K,” he wrote.
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Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.
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