First-time jobless claims decreased to 340,000 for the week ending Aug. 28, from an upwardly revised 354,000 the week before, while continuing claims fell to 2.75 million, according to government data released on Thursday.
While the weekly churn in the labor market is always of paramount interest, that churn is going to be a bit more in focus over the next few weeks as the damage from Hurricane Ida and the impact of all 50 states eliminating federal Pandemic Unemployment Assistance are felt.
When traditional seasonal distortions around the Labor Day holiday are also factored in, it will be October before one gets a true sense of where the trend in first-time jobless claims settles. We would urge caution in reading too much into the week-to-week labor market data.
Investors and policymakers should anticipate distortions around the storm to begin showing up in the claims data for the week ending Sept. 4, with the bulk of that impact arriving the next week.
Widespread power outages and the destruction of cell towers in the affected areas of Alabama, Louisiana and Mississippi will most likely delay the reporting of lost employment and hours worked.
In addition, the flooding in Tennessee and the damage in the New York metropolitan area will add to the noise around first-time jobless claims over the next three weeks.
While the paring back of unemployment assistance will cause the number of those on the rolls to decline, early research on the relationship between reducing claims and rising employment suggests that there is no statistically significant relationship between the two.
Given the economic strains caused by the delta variant and another round of climate shock, the decision to pare back on unemployment assistance was in retrospect premature and not well timed.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.