The U.S. labor market continued to perform well in August. Initial claims for unemployment insurance benefits remain at a historically low level. New seasonally adjusted (SA), filings for unemployment insurance benefits fell by 12,000 to 232,000 for the week ending August 12th, while the four week moving average was 240,500. On a non-seasonally (NSA), adjusted basis, new claims fell by 14,000 to 207,300.
Unemployment insurance claims are a count of recipients by state of benefits mandated by federal law. Initial claims for unemployment benefits provide a proxy for layoffs, whereas continuing claims give a timely sense of the stock of unemployed workers.
Continuing claims fell 3,000 week on week (w/w), to 1.953 million, (M) for the week ended August 5th. The four week moving average was down from 1.966M to 1,960M. The insured unemployment rate remained unchanged at 1.4%. Continuing claims have now been below 2M for 13 straight weeks, which results in less labor market slack. This week was the 125th consecutive week that new filings were below the 300,000 threshold, (the threshold associated with a strong labor market). Four states reported an increase in NSA adjusted new filings in excess of 1,000 in the week ended August 5th. Three of these states noted layoffs in manufacturing jobs.
Figure 1 presents a long-term view of SA initial claims for unemployment insurance benefits from 1967 to present. This chart highlights the three most noteworthy recessions over this 50 year period, showing the devastating rise in jobless claims that occurs as a result of massive layoffs. Initial weekly claims were down 61% since the recession ended July 2009.
Figure 2 charts the same data (SA only), from 2009 to present and includes color coding which depicts where we are on the economic spectrum. We are now solidly in the “green zone” which means sustained economic growth according to the Department of Labor.
The labor market continues to perform well. It is expected to create 2.1M jobs this year down slightly from last year’s 2.3M increase. Job openings remain elevated and have consistently exceeded hiring and layoffs remain especially low. Referencing the Job Openings and Turnover Survey (JOLT), report from the Bureau of Labor Statistics (BLS), job openings increased to 6.2M on the last business day of June. Over the month, hires and separation were little changed at 5.4M and separations 5.2M respectfully.
In the minutes of the FED’s July open market committee meeting there was considerable discussion surrounding why the market is not witnessing stronger wage and price inflation. The FED would normally have expected to see stronger inflation pressure at this point in the economic cycle. The continued low inflation has slowed the rate of interest rate hikes that were previously anticipated. The current thinking it that the next hike will be this coming December.
At Gerdau, we keep a keen eye on the employment numbers because we have demonstrated that there is an excellent correlation between employment levels and steel consumption. High job creation and low unemployment translate to strong steel demand and vice versa.