U.S. Jobs Picture Worsening

Initial jobless claims spiked to 406,000 for the week ended July 19, a high since March. Although July prints do tend to be somewhat volatile due to plant retooling, this print appears to represent a true worsening of the jobs picture.

Michigan and Kentucky actually reported declines in initial claims due to fewer auto industry layoffs. In contrast, claims in other states such as South Carolina, North Carolina, Georgia and Tennessee stemmed from layoffs in manufacturing, textiles and other goods-producing industries, while California experienced layoffs in the service industry and New York experienced layoffs in construction, transportation and public administration.

The Bureau of Labor Statistics reported yesterday that employers had taken 1,643 "mass layoff" actions that resulted in 165,697 unemployment insurance filings, the highest level of such activity since 2003.

Consequently, the spike in claims appears due less to seasonal volatility and more to the economic slowdown. This provides more support for the notion that U.S. consumers are stretched and weakening and that, as the tax rebate spending wears off, retail sales and consumption will sag.

RBC Financial Group
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The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.