The pandemic is is inflicting a grim toll on the country — the death toll Wednesday passed their spring peak with 2,760 deceased. The CDC director said the U.S. is entering the most difficult time in public health history.
However, Thursday’s unemployment claims numbers surprised to the upside as initial claims came in at 712,000, under expectations, falling for the first time in weeks.
The probable reason for the unexpectedness, according to Pantheon’s Ian Shepherdson, is likely noise from Thanksgiving, and that this good news may not be so good at all.
“The plunge in initial claims does not refute the idea that the trend is rising,” Shepherdson wrote. “We expected a sharp fall because of the difficulty of adjusting for Thanksgiving.”
Next week, Shepherdson wrote, claims will probably be "above the 800K mark for the first time in eight weeks," due to surges in Covid cases resulting in tightened restrictions that are "hammering the discretionary services sector."
“It would be a mistake to regard the decline [in unemployment claims] as mere mean reversion,” Shepherdson wrote. “The drop is the fluke, not the increases which preceded it.”
JPMorgan’s Daniel Silver also pointed to Thanksgiving as a factor that “can generate some added noise to the mix.”
However, Silver saw slightly more optimism, noting that the improvement “signals that recent virus-related developments haven’t damaged the labor market too severely.”
Over at Indeed.com, economist AnnElizabeth Konkel pointed to the fact that the numbers really don't provide much clarity, due to backlogs and administrative issues highlighted in a recent U.S. GAO report.
But "regardless of the GAO report, long-term joblessness is still happening in real time," she wrote. “Even with inaccuracy, the ballpark size of total initial claims underscores that COVID-19 continues to inflect deep economic pain.”
Konkel puts it another way: “Even with an increasingly murky unemployment system, it’s clear that there are still millions struggling to find work during a pandemic. That has not changed once during this crisis."
So what does this mean going forward as vaccines get approval and begin distribution? In Konkel’s view, it’s a hurdle to “rapid economic recovery.”
“Hope may be on the horizon with a possible vaccine, but it won’t instantaneously reverse the widespread economic destruction caused by the coronavirus,” Konkel wrote. “With record virus cases combined with few outdoor options for businesses because of winter, the pain will continue.”