A sharp increase in jobless claims as happened last week is typically reason for concern; in this case, while it wasn’t welcomed, it was to be expected.
Initial jobless claims soared by 62,000 to reach 298,000 for the week ended September 2, reaching its highest point since April 2015. That increase was largely attributable to Hurricane Harvey, as claims in Texas increased by nearly 52,000 for the week. The four-week moving average of jobless claims also rose, increasing by 13,500 to 250,250.
Despite the sharp increase, this morning’s release marks the 131st consecutive week that jobless claims have been below 300,000, which is the longest streak since 1970 when the labor market was considerably smaller. With the high likelihood that Harvey-related claims could increase again this week (as more individuals are able to file) and with Hurricane Irma now headed toward Florida, it appears likely that first-time claims could remain elevated in the near-term.
The primary concern related to both hurricanes is the human story, not the economic one. Nonetheless, the near-term economic impact of what increasingly appears to be two severe natural disasters in close proximity to one another will be a clear negative, and disruptive to the regional economies in the impacted areas. Having said that, the national economy appears to remain on track, with job creation, low unemployment, high consumer and business confidence, and constructive financial conditions.
Although the Fed is seemingly poised to raise rates again this month and is expected to announce plans to begin to curtail its balance sheet, monetary policy remains loose and accommodative to growth.
It’s reasonable to expect that jobless claims will remain elevated in the near-term as the immediate impact of Harvey – and likely Irma – is absorbed; however, neither is likely to derail the expansion.
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