The larger-than-expected decline in initial jobless claims last week is a welcome development, but at 900K, new filings remain elevated. Another negative print for payrolls in January remains within the realm of possibility.
Down, but Perhaps Not Enough to Escape Another Negative Payroll Print
After leaping over the first full week of January, new filings for unemployment benefits fell the week ending Jan. 16. However, at 900K, initial claims remain elevated as the jobs market continues to suffer under efforts to contain COVID.
This week’s claims numbers cover the survey week for the January employment report. Between the December survey week, initial filings edged up by 8K.That compares with an increase of 144K between the November and December surveys and suggests that another decline in payrolls remains a real possibility in the January employment report. The four-week average rose to 848K, the highest since September, and indicates that labor market conditions continued to generally deteriorate over the past month.
In contrast to the drop in filings for regular benefits on both a seasonally and non-seasonally adjusted basis, initial claims for the Pandemic Unemployment Assistance program jumped to 424K (not seasonally adjusted). The program, which covers gig workers and the self-employed, was extended at the last minute in December, so the increase may reflect a backlog of filings since the program was planned to expire.
Continuing Claims Decline, but Slower Improvement Ahead
The total number of claims recipients across all programs fell to 16.0M the week ending Jan. 2 (the most recent week available). However, with new claims having moved up in recent weeks and more generous weekly payments following the December relief bill, we expect to see the pace of improvement slow.