MANHATTAN (CN) — After 10 straight weeks of declining unemployment, new claims have begun to level off, causing stock markets to flatten, as well.
The Department of Labor announced that 1.5 million new unemployment claims were filed for the week ending June 13, keeping the unemployment rate at about 14%. The department reported 1.57 million claims had been filed the previous week.
Wall Street, already seeing choppy trading in futures, edged downward after the report. The Dow Jones Industrial Average lost 200 points at the morning bell, while the S&P 500 and Nasdaq had somewhat lesser drops.
“The current U.S. equity market rally looks a lot like the lift-off in March 2009 after the Financial Crisis. If that analogy holds, we’re in for seven weeks of a do-nothing market,” wrote Nicholas Colas and Jessica Rabe of DataTrek Research on Thursday.
The report is a drab reminder of the poor employment landscape, despite a stunning jobs report that showed nonfarm jobs rose by 2.5 million in May.
Many economists had predicted consistently dropping unemployment but said it would bottom out at some point. Thursday’s reported claims were a tad higher than the estimated 1.3 million most economists had predicted. In total, more than 46 million unemployment claims have been filed since mid-March when states began to lock down to prevent the spread of Covid-19.
The report also shows that continuing claims have mostly flattened, with 20.5 million claims filed during the week of June 6 versus 20.6 million the previous week.
If unemployment claims consistently remain at about 1 million per week, it also puts additional pressure on Congress to continue Covid-19 unemployment benefits in some form.
Political battle lines are increasingly hardening over the prospect of continuing the $600 weekly plus-up of unemployment benefits during the coronavirus pandemic, with Republicans saying it incentivizes workers to remain at home while Democrats characterize the extra cash as a lifeline for out-of-work blue-collar workers.
The chairman of the House Select Subcommittee on the Coronavirus Crisis sent a letter Thursday to the Treasury Department and the Office of Management and Budget, calling for the Trump administration to release additional forecasts and economic data. The administration had earlier decided to cancel its semiannual economic and employment projections to Congress.
“Concealing economic forecasts from the American people during a jobs crisis is counterproductive, in conflict with bipartisan precedent, and contrary to the intent of Congress,” the letter states.
Investors willing to look past unemployment saw some good news out of the Federal Reserve Bank of Philadelphia, which reported a spike in regional manufacturing orders and shipments. According to the survey, the general activity index increased from -43.1 last month to 27.5 in early June among manufacturers in the region.
Most manufacturers expect steady or slightly decreasing employment, but they also report a generally positive outlook. All future indicators showed improvement, with more than 75% of firms expecting an increase in activity over the next six months while only 9% expect a decline.
Earlier in the week markets were kept aloft by new moves by the Federal Reserve, which announced it would purchase up to $750 billion in individual corporate bonds on the secondary market. While the news helped to bolster markets, some fiscal conservatives have questioned whether the plan represents an out-of-bounds foray by the Fed into fiscal policy.
During two days of testimony before Congress, Federal Reserve Chairman Jerome Powell assured critics the bond-buying facility was opened only due to an “excess of caution” and that the central bank’s purchases would “be at the bottom of the range.”
Central banks abroad also have taken aggressive steps to keep markets steady. In an 8-1 vote on Thursday, the Bank of England said it would purchase an additional 100 billion pounds of government bonds to a total of 745 billion pounds. The bank voted unanimously to keep its interest rate at 0.1%.
“Risky asset prices have recovered further from their March lows, although they have remained sensitive to new son the evolution of the pandemic,” the bank said in a statement.
Yet the move did not have a huge positive effect on European markets. As of 8:30 a.m. EST, most exchanges on the continent remained down at least 1%, including the Financial Times Stock Exchange in London. British currency got a boost, however, with the pound gaining back some of its lost value shortly after the announcement.
More than 8.3 million people have been infected by Covid-19 worldwide, while 449,000 have died, according to data compiled by Johns Hopkins University. In the United States, 2.1 million people have contracted Covid-19, while more than 117,000 have died.
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