New filings for unemployment benefits in the US soared last week, delivering a sharp rebuke to the consensus forecast, which was looking for a modest decline. Instead, economists were blindsided as jobless claims surged 20,000 to a seasonally adjusted 294,000 for the week through May 7, the Labor Department reports. The government advises that no “special factors” influenced today’s release, which marks the biggest weekly rise for the seasonally adjusted data in two years. But the numbers could be skewed by a Verizon strike in New York state and so the bearish report may be less threatening than it appears on first glance.
“New York [and the Verizon strike in the state] accounted for most of the increase,” says Jacob Oubina, a senior US economist at RBC Capital Markets, via Bloomberg. “It’s not a clean read. The labor market is looking pretty healthy and that’s going to continue.”
For the moment, however, the claims data is dirty. Deciding if the mud will soon wash will have to wait until next week’s update… or beyond?
Meantime, the year-over-year change for claims in unadjusted terms looks troubling. New filings rose nearly 8% last week vs. the year-earlier figure before seasonal adjustment—the second straight weekly increase and the biggest annual jump in more than two years.
One bad week (or two) hardly constitutes a definitive signal for this leading indicator, which is notoriously volatile in the short term, and so it’s wise to reserve judgment for a bit. But the case for optimism is on a short leash until further notice.
It seems that we’ve run out of road for further disappointments in the weekly claims data. Today’s release may prove to be an outlier with minimal relevance for the US business cycle. But that explanation will melt faster than a snowball in August if next week’s numbers push new claims above the seasonally adjusted 300,000 mark for the first time in more than a year.