US: Jobless Claims trend lower with volatility and glitches – Wells Fargo

Data released on Thursday showed initial jobless claims reached 3.169 million last week, a decline from the previous week. Analysts at Wells Fargo point out that while claims are clearly trending lower, the data are volatile and are influenced by processing glitches.

Key Quotes: 

“It is possible that some of the earlier surge in claims included some persons that were ineligible at that time and those applicants refiled their claim again. This may help explain the gap between the 33.483-million cumulative increase in first-time unemployment claims over the past seven weeks and the 22.647-million persons currently receiving unemployment insurance benefits.”

“While first-time unemployment claims are one of the most important leading indicators for economic growth and are clearly declining, continuing unemployment claims provide a better read on how persistent economic weakness is likely to be.”

“This past week’s rise in continuing claims was the largest ever and brought the insured unemployment rate up to 15.5%. By comparison, the insured unemployment rate was just 1.2% in midMarch, prior to when shutdowns were implemented across the country to help contain the spread of COVID-19.”

“The historic relationship between the insured unemployment rate and more widely following monthly civilian unemployment rate (U3), would imply the unemployment rate would spike to between 25% and 30%. We doubt that will occur, however, as it is inconceivable that we would see a spike in new entrants, voluntary quits and re-entrants to the workforce, which is the bulk of the difference between the insured unemployment rate and civilian unemployment rates. Our forecast for tomorrow’s jobless rate is 16.2%.”