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Preview: US Weekly Jobless Claims & July Retail Sales

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You would think that with a huge spike in unemployment in the United States, it would be easy for businesses to find employees.

However, according to the NFIB, the largest small-business lobbying bureau, it seems to be the opposite.

37% of small businesses in America report that finding qualified employees is their largest challenge. This is especially true in the construction sector.

What’s Going On?

Unemployment figures peaked in May and have been descending ever since. However, a substantial number of people need to be classified as unemployed in order to receive federal and state COVID benefits.

As politicians haggle over whether or not to extend the benefits, President Trump has taken unilateral action of questionable legality to extend some of the benefits.

The question is now: how will that impact potential worker behavior? President Trump’s executive order cut the controversial weekly benefit payment to $400. In addition, fewer people will be eligible.

State participation could also condition its availability in some places. So will that be enough to incentivize some people to get jobs?

How’s the Labor Market?

At the end of July, there were 6.9M job openings in comparison to 17.0M people on unemployment.

Labor “churn” (the number of people fired versus the number of people who obtained jobs), showed a net of 1.9M new hires. Meanwhile, over 4 million people applied for unemployment benefits.

The figures point to a significant distortion in the labor market from compensation for people losing jobs in the middle of the pandemic.

However, this week’s figures were collected prior to Trump’s announcement, so likely won’t be affected, yet.

What We Are Looking For

The consensus among analysts is that a further 1.14M people sought unemployment benefits last week. This is a modest slowing of the pace from 1.19M reported in the prior week.

However, expectations indicate that a significantly larger number will return to work. Continuing jobless claims are projected to drop to 15.9M compared to 16.1M prior.

The other important measure of the economy’s recovery is consumer buying. Last month saw the continuation of lockdown restrictions in some states, notably California, and the reintroduction of lockdowns in Texas.

Both are expected to have had a drag on retail sales data.

The market generally focuses on the Retail Sales Ex Autos figure. Projections are for this to show a meager growth of 1.3% compared to 7.3% in June.

If we include cars, then we can expect retail sales to increase by only 0.8% compared to 5.6%. This comes on the heels of reports that auto dealers in the US are low on inventory, making it difficult for customers to buy.

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