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US jobless claims dip below a million as Wall Street rebounds

Written by on 13/08/2020

The number of Americans seeking unemployment benefits has fallen below one million for the first time since the start of the COVID-19 pandemic in the US.

However, last week’s drop has been put down to the ending of a $600 weekly supplement, which is likely to have discouraged some from filing claims.

The updated figures from the Labor Department did little to change economists’ views that the jobs market recovery was faltering in the face of the continuing coronavirus emergency.

The New York Stock Exchange (NYSE)
Image: The stock market and economy are ‘disconnected’, say analysts

Chris Rupkey, chief economist at MUFG in New York said: “It is too early to declare victory as there is a long way to go to stop the bleeding of the labour markets and part of the reason for reduced filings looks to be tied to the expiration of that $600 weekly turbo-boost for unemployment benefits from the expired federal programme at the end of July.”

Initial claims for state unemployment benefits fell 228,000 to a seasonally adjusted 963,000 for the week ending 8 August.

That was the lowest level since mid-March when authorities started shutting down non-essential business to slow the spread of COVID-19.

Claims peaked at a record 6.9 million in late March.

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Even with last week’s fall, claims are well above their 695,000 peak during the financial crash in 2008.

A total 28.3 million people were receiving unemployment benefit at the end of July.

Data last week showed the economy had regained only 9.3 million jobs of the 22 million lost between February and April, indicating that it faces a long road to reach pre-pandemic levels.

In contrast, Wall Street has recovered most of the trillions of dollars in losses at the start of the pandemic and the benchmark S&P 500 was within a few points of a record high.

LONDON, ENGLAND - SEPTEMBER 29: The Apple logo sits on a sign outside company's Covent Garden store on September 29, 2016 in London, England. Technology company Apple has announced that Battersea Power Station, a Grade II listed building and former coal-fired power station, is to be its new London headquarters by 2021. The building, which has been unoccupied for decades, is currently undergoing a £9 billion restoration. (Photo by Jack Taylor/Getty Images)
Image: The rise in share price puts Apple close to be being valued at $2trn

The tech-heavy Nasdaq was the first of the three major indexes to hit a record high in June.

However, the blue-chip Dow is about 5.6% below its February peak.

Stocks in Apple rose 2.4% to about $463.09 (£354.80), less than $5 (£3.83) a share shy of the tech giant being valued at $2trn (£1.53trn).

Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina, said “Our take on a new high, if it happens, is that it’s another reminder to investors how disconnected the stock market and the economy have been this year.

“The stocks have soared but the economy – it’s improved, yes – but a million initial claims is still not good.”

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Meanwhile, markets continued to hold on to hopes the Democrats and the White House would reach an agreement for a stimulus to help the economy recover.

Unemployment benefits have been a sticking point in their talks.

The US presidential election is also expected to add another layer of uncertainty into markets, with roughly 12 weeks remaining until election day.

“The fact that interest rates are so low, people really have no place to put money,” said Kevin Miller, chief investment officer of Minnesota-based E-Valuator Funds.

“A lot of the larger companies that make up the S&P 500 have a heavy cash position, they really have strong free cash flow, so it’s a magnet for investor dollars.”

 Sky News

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