The ranks of the unemployed are expected to swell anew, with Wall Street economists forecasting a marginal improvement in weekly jobless claims amid a relentless wave of COVID-19 infections dragging on the economy.
The Department of Labor will release its weekly report on new jobless claims Thursday morning at 8:30 a.m. ET. Here is what Wall Street is expecting, according to consensus estimates compiled by Bloomberg:
Initial jobless claims, week ended Jan. 23: 875,000 expected vs. 900,000 during the prior week
Continuing claims, week ended Jan. 16: 5.088 million expected vs. 5.054 million during prior week
Although jobless claims dipped unexpectedly last week, the high-frequency barometer of the labor market has hovered perilously close to the one million mark — a psychologically important barrier that hasn’t been breached since last year.
The weekly data have become a proxy for a labor market that’s been battered by COVID-19 closures, forcing many service-sector workers out of their jobs as Washington wages partisan battles over ways to backstop the economy. Although the newly-inaugurated Biden administration has pledged a nearly $2 trillion stimulus, the plan isn’t expected to be debated and voted upon by Congress for weeks.
According to JPMorgan Chase economist Daniel Silver, recent claims data “look consistent with some weakening in the labor market that is likely tied to an intensification of COVID-19 issues over the past couple of months.”
“Through some of the weekly ups and downs in the data, the four-week moving average for initial claims has moved up by more than 100,000 between the end of November and the latest weekly figure. And the downward trend for continuing claims filings clearly has moderated in recent months,” Silver added.
Continuing claims, a measure of the total number of individuals still receiving regular state unemployment benefits, have remained on a mostly steady downtrend since peaking at nearly 25 million in May. Yet pockets of weakness remain in several of the hardest-hit states.
All of that bodes poorly for first quarter growth, which economists were counting on to help put a helter-skelter 2020 in the rear view mirror. The growth picture will be clearer when the government reports fourth quarter gross domestic product (GDP) figures on Thursday.
“Expectations [for Q4] have been lowered marginally on the back of weaker consumer spending numbers and falling employment in December, but we should still expect a 4%+ growth figure,” ING economists wrote recently.
However, “we are more worried about Q1 given the loss of economic momentum following the latest Covid spikes and the reintroduction of containment measures in many areas,” the bank said. “Nonetheless, with vaccinations getting underway and household savings levels at record highs there are clear reasons for optimism” in the second quarter of this year.
Growth hopes are riding heavily on the effort to roll out the COVID-19 vaccine to the public, but the early push has gotten off to a rocky start.
Javier David is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek
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