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Unemployment claims rise again

December 18, 2020

graph displaying unemployment claims by expansion

Source: Department of Labor


Initial unemployment claims moved higher for a second straight week with an increase of 23,000 to 885,000. Continuing claims were lower, although this likely represents an exhaustion of benefits to some degree as evidenced by the ongoing rise in PEUC recipients.

The four-week moving average of initial claims has now climbed by 72,500 over the last two weeks, a jump that suggests that the economy is at an elevated risk of an outright contraction. In fact, there have been only three increases of this magnitude historically that have not led directly into recessions and two of these resulted from short-lived exogenous shocks (the natural gas shortage in 1977 and Hurricane Katrina in 2005). The current upswing has also been driven by a special factor, of course, but it is unlikely to prove so fleeting. As the pace of new COVID infections remains elevated and business restrictions remain in place, it is to be expected that the labor market will remain under pressure at least into the early stages of 2021 and that the data flow more generally will increasingly come in on the negative side.

Lingering signs of strength

To be sure, the economy isn’t universally downshifting. Manufacturing and residential real estate both remain fairly buoyant, as reflected in this week’s flash PMI, housing starts, and home builder sentiment data. Housing, especially, has been a solid leading indicator of business cycle turning points and can be expected to provide some ballast as the broader backdrop deteriorates in the weeks ahead. These numbers also lend credence to the view that the economy is poised for broad-based and robust gains once the pandemic finally runs its course.


Daily Trivia

Hong Kong breathalyzers, which began to malfunction when the testee’s birth data was entered, were among the few casualties of what largely averted calamity?

Previous Question

What firm’s ticker symbol, retired after a 2013 acquisition, referenced a man who passed away 26 years prior to the company’s founding in 1853?


Steinway: LVB (Ludwig van Beethoven)


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