What's going on?
Coronavirus continues to be all take and no give: the number of Americans filing for unemployment benefits remained in the millions for an eighth straight week as the US economy reels from the pandemic.
What does this mean?
The number of Americans filing for unemployment benefits may have fallen for six weeks in a row, but the three million added last week was still 20% more than expected. That means the US economy’s shed 36 million jobs in just eight weeks – as many as were lost in the 18 months after the global financial crisis (tweet this).
The worse-than-expected numbers underscore the ongoing impact of the lockdown, as retailers, hotels, and restaurants largely remain closed and American consumers keep their spending money to themselves. And the chairman of the Federal Reserve didn’t exactly boost the mood on Wednesday: he warned mass bankruptcies and more unemployment were to come if the US government didn’t do more to help.
Why should I care?
For markets: Change places!
Thursday’s unemployment benefits data comes hot on the heels of a US jobs report showing a 14.7% unemployment rate – the highest since the Second World War. This fast-changing environment is making life difficult for economists, who are constantly scrambling to update their forecasts. Take those at investment bank Goldman Sachs: they said on Wednesday that they now expect the US unemployment rate to peak at 25% – up from their earlier 15% estimate, and in line with the unemployment rate during the Great Depression.
The bigger picture: I’m feeling lucky.
With so much backward-looking economic data out there, jobless claims reports are revealing in that they reflect economic conditions as they are at that moment. That might explain why savvy investors try to use alternative data to help predict the reports: Google search trends for keywords like “unemployment insurance”, for example, can be a good indicator of the numbers before they’re officially published.