Trading Nation

Jobless claims surge again — here's what to watch

Ivana Freitas
US weekly jobless claims are now at 26 million—Five experts on what it means to Wall Street
US weekly jobless claims are now at 26 million—Five experts on what it means to Wall Street

U.S. weekly jobs claims rose by 4.4 million last week, bringing the total number to about 26 million since the coronavirus pandemic began. 

Here's what five market experts are watching.

Businesses in need of business 

Jason Furman, former chair of the Council of Economic Advisers, said that in order for the program to aid businesses to fully work, consumer demand must be there. 

"I think in some sense the numbers are telling us what we already see with our eyes and it's telling us we have a program to help people and help businesses get through this, we just need business to be there on the other end for all it to work."

Key indicators for jobs report

Alex Brill, resident fellow at the American Enterprise Institute, said claim numbers and insured rates could be an indicator for what will be seen in the jobs report at the end of this month. 

"We want the program to work and I think that sadly what we're seeing is that the program is working quite well. And I say sadly because we are seeing tens of millions of people process though that system and we're going to continue to see that I think for the next few weeks as the backlogs in certain states get worked through … and the other key statistic to watch in this data set is the continuing claims number and the insured rate. I think last week that the percentage of the workforce that was claiming benefits was around 8% and I think now, I don't have the release in front of me, but I think my mental math tells me it's over 10% and that's something we have never seen before, too, and I think it's going to be an indicator of what we are going to see at the end of the month when we see the jobs report."

Bullish look to the future

Jeff Mortimer, director of investment strategy at BNY Mellon Wealth Management, said in order to be bullish in this market, one must look to the future. 

"Twenty-six million [jobless claims] and counting and yet markets since the release of that data continue to digest them well, showing you that news was already anticipated. That's why we drew down 35% from the high and why we sit at these levels today. But markets to me digesting, not only digesting numbers like this, but also digesting the PMI numbers [Thursday], digesting the earnings numbers [Thursday], [is understanding] that to be bearish you are looking at the present and the past. And in order to be bullish you must be looking to the future, that's what markets tend to do. They're always looking out, they're bending the curve … they're looking for all those things, perhaps better treatment, or eventually a vaccine, and so they are going to price themselves. And so, it can look a little odd in real time if you don't understand how markets work … once you understand how they work, that you're seeing that the markets are pricing in a better future. And we may not know what that future is but it's interesting. Markets are fairly good at getting these turning points and they don't look for bad or good, they look for better or worse. And that's what markets are good at doing, they're trying to find that inflection point." 

Shutdown could result in more harm than good 

Leon Cooperman, CEO of the Omega Family Office, said he believes the shutdown has caused more harm than good. 

"We have an epic battle right now in the market. It's a weak economy versus massive stimulus ... Tom Friedman wrote a comment for The New York Times a few weeks ago, maybe a month ago, about more harm being done by the shutdown than benefits and I'm kind of that view. I think we have to stop the panic and end the total isolation. We have to go back to start working the economy and what would change my view is that we would come back more quickly, and this becomes more of an old nightmare. I don't think that's going to happen but that would change my mind and I'm flexible. And I want to make it clear, the S&P doesn't excite me at this level, but I find individual situations are very attractive, particularly in credit." 

Remain on the defense 

Dan Suzuki, deputy CIO at Richard Bernstein Advisors, said to hold out on becoming bullish until things get better. 

"From our perspective, the reason that the market is going up in the face of this horrific data is that right now there is a general recognition that the economy globally is operating as close to zero as it feasibly can. Therefore, no matter how bad that number is, it's telling you what you already know. So, at this point I think the market cares less about the magnitude of the prints that you're getting and much more about indications on duration, which you're not getting from these numbers. ... The incremental news has been positive in terms of slowing cases, the models pointing toward further slowing cases, the mass amount of stimulus, and hope for new drugs and new tests, all that stuff has been incrementally positive. I like to key in on just one thing that Jeff [Mortimer] mentioned, where we may differ a little bit on the take of what he said, but, you know, he said the market cares less about the absolutes about good or bad and much more directionally about better or worse and I completely agree with that view. Our view though right now, is anything you're looking at that's telling you the direction in which things are going, whether you're looking at the monthly indicators or the weekly indicators, everything is crashing to the downside. So, in our views, focusing just on jobless claims doesn't make a lot of sense to me. But I look at everything, you know, just look at the PMI numbers that came out [Thursday], you know, importantly while jobless claims did bottom after or peaked after the bottom of the last market, ISM and PMIs actually bottomed before. Those things are all still crashing down to the downside and so I think that while things are getting worse, you still want to be a little more defensibly positioned, especially with the rally that you've gotten. And look for things to get a little bit better before you actually want to get more bullish."