U.S. initial jobless claims declined slightly last week

*U.S. initial jobless claims declined to 2.98m during the week ending May 9 from 3.18m in the prior week, a smaller-than-expected decline (consensus: 2.5m), bringing its total over the last two months to 36.5m (Chart 1). Initial claims are now 57% below the end of March peak, but they remain historically high (4.3 times the pre-COVID peak of 695k), indicating a significant increase in the unemployment rate again in May, following the 10.3pp jump to 14.7% in April.

*The 195k decline in initial claims last week is the smallest decline since the start of April, which is surprising given that more states are gradually reopening their economies. If initial claims continue to fall at such a slow pace, the unemployment rate will continue to rise beyond May.

*Continuing claims for unemployment insurance (reported with a two-week lag) increased to 22.8m during the week ending May 2 from 22.4m in the prior week, a smaller-than-expected increase (consensus: 25.1m). See Chart 2. This suggests that a greater share of persons are returning to work and no longer need unemployment insurance or that states are taking a long time to process unemployment benefits. Continuing claims will be useful in signaling the eventual decline in the unemployment rate.

States with the largest number of claims during the week ending May 9 include Connecticut (299k), Georgia (241k), and Florida (222k). Only seven states reported an increase in initial claims. Connecticut had the largest increase in claims (+263k to 299k) and Texas had the largest decline (-102k to 142k).

The 10m total initial jobless claims between April 19 and May 9 points to continued significant increases in unemployment that will be reflected in the May Employment Report (scheduled for release on June 5). These initial claims numbers are still extremely elevated. In February, the total number of unemployed persons was 5.8m.

The sluggish decline in initial claims supports our expectation for a slow labor market recovery, dependent on health care developments. We expect the unemployment rate to be more than double its pre-crisis level at the end of 2021. A sluggish labor market recovery will constrain the rebound in consumption, especially of nonessential goods and services.

Chart 1:

Chart 2:

Roiana Reid, roiana.reid@berenberg-us.com

Member FINRA & SIPC
This email and any files or attachments transmitted with it may contain confidential or privileged information and are intended solely for the use of the intended recipient. If you are not the intended recipient, please do not copy, retain, disclose or use any part of the message or its attachments. Please notify the sender immediately by return email and destroy or delete any copies. Dissemination or use of this information by anyone other than the intended recipient is unauthorized and may be illegal. Communications by email cannot be guaranteed to be secure or error-free. Emails and their attachments are subject to being intercepted, becoming corrupted, getting lost or delayed, or may contain viruses. Therefore, neither the sender nor Berenberg Capital Markets LLC (BCM) accepts any liability for any errors or omissions in the content of this message or problems in its transmission, including those arising as a result of its transmission over the internet.
BCM does not assume liability for the correctness and completeness of all information given and/or attachments contained herein. The provided information has not been checked by a third party, especially an independent auditing firm. BCM explicitly points to the stated date of preparation. The information given can become incorrect due to passage of time and/or as a result of legal, political, economic or other changes. BCM does not assume responsibility to indicate such changes and/or to publish an updated document. Any document(s) or attachment(s) is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers.
In light of upcoming regulatory changes, please be informed that BCM will continue to share information with you until unsubscribe@berenberg-us.com receives your termination/deletion request. For more information about the General Data Protection Regulation (GDPR) and our privacy policies please refer to https://www.berenberg-us.com/legal-notice. BCM reserves all the rights in this communication. No part of this communication or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without BCM’s prior written consent.
The information contained herein and sourced may have been adopted from various news sources, for example, Bloomberg, Reuters, Street Account and various other sources. BCM does not claim accuracy, completeness, timeliness, suitability, or otherwise regarding all the information on the securities, stock markets, or developments referred to within. On no account should the Content be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgments. BCM is not responsible for any recipient(s) use of this information. This Content is not a solicitation or an offer to buy or sell any of the securities contained herein. This information does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of clients. Clients should consider whether any advice or recommendation in this Content is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of securities which may be referred to in this Content and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain securities.