Hurricane Harvey’s impact was apparent in this week’s initial claims data. For the week ending September 9th, initial claims for unemployment fell by 14,000 to an unrevised level of 284,000. The four week moving average, (4WMA) moved, up 13,000 from the previous to 263,250. Initial claims are now at the highest level since August 2016 and are expected to increase in the coming weeks. Analysts caution this this is just a temporary situation and nothing to be worried about as the labor market remains in good shape.
Continuing claims fell by 7,000 to 1.944 million for the week ending September 2nd and the insured unemployment rate remains unchanged at 1.4%.
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.
Figure 1 charts seasonally adjusted, (SA) initial claims from 2012 to present. Initial claims for unemployment insurance has been steadily decreasing since the great recession ended. The highlighted spike is a direct result of people being put-out of work due to damage and floods caused by hurricane Harvey. Initial claims are expected to run higher as hurricane Irma places workers in Florida on the unemployment line.
Figure 2 presents a view of both seasonally and non-seasonally adjusted initial claims for unemployment insurance benefits from 2005 to present. Initial weekly claims are down 52% since the recession ended July 2009. On this longer time scale the spike from Harvey is barely noticeable.
Historically, initial claims have spiked higher within one to two weeks after a hurricane, so the increase was not unexpected. The job market remains strong, averaging 160,000 over the past six months and 175,000 over the past 12 months. These numbers both exceed the number of new entrants into the job-market which is approximately 100,000.
The Bureau of Labor Statistics Job Openings and Turnover Survey, (JOLT) reported that there were 6.2M job openings on the last day of July, unchanged from the previous month. The quits rate and the layoffs and discharges rate were little changed at 2.2% and 1.2%, respectively. The quit rate is at a session high, meaning that workers see jobs as readily available and as a result are more likely to switch jobs.
The spike in unemployment from the hurricanes is expected to be short lived as work resumes to recover and rebuild.
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.