MANHATTAN (CN) — Wall Street flattened on Thursday as unemployment numbers remained largely the same as the week before, indicating recent positive indicators don’t tell the economy’s full story.
At the closing bell, the Dow Jones Industrial Average lost about three dozen points, barely a 0.15% decrease, while the S&P 500 remained barely above 0%. The Nasdaq gained only 0.33% for the day, but that was enough to keep the tech-laden market on a five-day winning streak.
With a dearth of economic indicators, investors likely continued to be influenced by the growing spike in Covid-19 cases in several areas of the country, as well as the still-high influx of new unemployment claims.
Before markets opened on Thursday, 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.
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. “We would need to see the same level of job growth for months and months and months to fill in the current jobs deficit,” said Heidi Shierholz, a senior economist at the Economic Policy Institute.
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.
“The fact that we’re not seeing more of a decline in continuing claims does raise some concern that rehiring is potentially not as robust as we need,” Shierholz said. “There’s a reason for that. It wasn’t just the lockdown; it’s the virus. People are still afraid to go out.”
Joel Naroff, a consulting economist, noted Thursday that roughly 7 million workers filed for unemployment compensation over the past four weeks.
“The number of people receiving unemployment checks hardly declined, indicating that at least so far, hiring firms are barely overcoming the firing firms,” he wrote.
This means the June jobs report may show a greater unemployment rate than was reported during the surprising May report. “Indeed, if the [Bureau of Labor Statistics] corrects its misclassification problem, we could actually see the rate rise from the May published rate,” he said
The May jobs report, while stunning investors and economists with its 2.5 million jobs gained, also included footnotes in which the BLS admitted certain oddities that artificially brightened the unemployment picture. The agency noted that 15% fewer respondents participated in the May jobs report than usual and that many misclassified workers as employed but absent even though they were unemployed.
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.
During a hearing of the House Select Subcommittee on the Coronavirus Crisis, those stark political lines were on full display.
Democrats argued prematurely ending unemployment benefits would ultimately hurt the economy because it would damage spending power and could lead to a “wave of foreclosures.”
Jason Furman, a professor of economic policy at Harvard University, noted May’s positive jobs report “was the easiest economic progress to make” because employers were recalling employees due to various stimulus packages. “Make no mistake, the economy is not doing this on its own,” he said. “It is doing this with a tremendous, tremendous amount of support from public policy.”
Others said state and local governments needed more aid or would risk firing employees like teachers. “The greatest fear isn’t workers taking the $600 and not returning to work,” Williams Spriggs, chief economist at the AFL-CIO, said during the hearing. “The greatest fear is workers being unable to return to work because we haven’t done the things to reopen schools.”
Republicans said the $600 plus-up incentivized workers to remain on unemployment and would hurt a V-shaped recovery, as well as lauding states that reopened early.
Republican Representative Jim Jordan said states that reopened early saw a bigger decrease in unemployment. “It is time to reopen our economy,” the Ohio congressman said. “Let the Great American Comeback happen.”
Shierholz said unemployment benefits in the United States — which typically account for 40% of a person’s wages — should be extended, at least in some way, to keep households solvent. “Spending on unemployment insurance is the most efficient thing to boost the economy,” she said, noting it’s always at the top of economists’ stimulus “to do” suggestion lists.
More than 8.4 million people have been infected by Covid-19 worldwide, while 450,000 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 118,000 have died.
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