Claims Jump as Social Policies Tighten
•Initial Claims for Unemployment Insurance increased by 181,000 for the week ending January 9, to hit 965k.
•Import Prices increased by 0.9 percent in December.
Initial claims for unemployment insurance climbed by 181,000 for the week ending January 9, to hit 965,000, a clear elevation from the recent band around 800,000. The jump in initial claims is consistent with the weak payroll jobs report for December, which showed a net loss of 140,000 jobs nationwide for the month. Despite solid, and even strong, gains in manufacturing, construction, transportation and other industries in December, nearly half a million jobs were lost on a net basis in leisure and hospitality industries as social mitigation policies tightened due to the winter surge in the coronavirus. We do not see initial claims by occupation in this morning’s data release, but it is safe to infer that the jump in claims comes as a result of reduced sales at restaurants, bars, hotels and other consumer-facing small-to-medium sized businesses. Continuing claims increased by 199,000 for the week ending January 2, to hit 5,271,000. The total number of continuing claims for all unemployment benefit programs fell by 744,511 for the week ending December 26, to hit 18,406,940.
There have been many forces acting on the headline labor data in recent months, including social mitigation policies, improving manufacturing conditions, stronger housing activity, the shedding of temporary census workers, the extension and expiration of benefits programs and the closure of businesses succumbing to the weak demand through the year of COVID-19. What is unique about this combination of forces is that risk of an adverse feedback loop spreading through most or all industries appears to be lower than it has been historically. With huge amounts of fiscal stimulus in place and more expected soon, highly accommodative monetary policy, vaccines on the way, and the expected spend out of pent up demand, we expect labor conditions to remain solid in many industries, despite the weak headline data this winter.
The U.S. Import Price Index increased by 0.9 percent in December. Fuel imports gained 7.8 percent, while non-fuel imports increased by 0.4 percent. Tightening global oil markets and a lower value of the dollar were key factors in pushing up prices in December. Also, non-fuel industrial supply prices increased. Industrial commodity prices are generally warming up as U.S. manufacturers look beyond the current surge in the coronavirus and anticipate strong demand this summer.
Market Reaction: U.S. equity markets opened with gains. The 10-Year T-bond yield is up to 1.09 percent. NYMEX crude oil is down to $52.88/barrel. Natural gas futures are down to $2.68/mmbtu.
