Continuing Jobless Claims Plummet from Record High

Initial filings for Jobless Claims came in below expectations for the second consecutive week, but the bigger news is the enormous drop in continuing claims, which sliced half a percentage point off the insured unemployment rate.

Initial filings dropped to 522k in the week ending July 11, marking the third straight improvement and the second week that claims have come in below 600k. Last week’s figure was revised up by 4k to 569k.

The 4-week average is now 584,500, the first time it has been below 600k since January.

As Jennifer Lee from BMO Capital Markets noted, “this leaves first-time claimants firmly below March's recent peak of 674,000.”

Continuing claims fell a staggering 642k to 6.273 million, the biggest one-week drop ever, in the week ending July 4. The fall must be caused, in part at least, by seasonal factors, but considering the previous week was revised up to yet another all-time high at 6.915 million, any downward shift will be considered encouraging.

“The combination of many factors (stimulus effects, benefits roll, seasonal factors and auto-plant re-openings) affecting continuing claims greatly skews the interpretation of the data,” said TD strategist Ian Pollick. 

“As such, we would argue that just as one needs to be cautious looking at the initial claims data, so too should they be while looking at the continuing claims data,” he added.

More good news: the drop in both sets of claims drove the insured unemployment rate down 0.5 points to 4.7%.

Looking ahead, Deutsche Bank’s Joseph LaVorgna said it looks as though July will see nonfarm losses in the range of 300,000 to 400,000. In order for payrolls to come in flat, he said weekly jobless claims would have to be in the range of 400k.

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