Jobless claims tick up from last week's pandemic-era lows

Mark Hamrick, Bankrate Senior Economic Analyst, breaks down the latest jobless claims figures.

Video transcript

ZACK GUZMAN: I want to turn to kind of how this changes maybe the outlook that we have here when it comes to growth and this recovery. Of course, it's stalled out as we've seen the rise of Delta variants. We've been discussing boosters and what that might look like and rolling them out to protect Americans and everyone else really across the globe.

But what does it mean more so for how the Fed might be thinking about this recovery? And for more on that, I want to bring on Mark Hamrick, Bankrate Senior Economic Analyst joins us right now. And, Mark, part of the reason why I mentioned, you know, some of the twilight zone that we've been seeing is that equities had really been rallying off of weaker underlying economic data, I think because a lot of people were expecting that that gives the Fed more reason to stay accommodative for longer. But what do you make of the data Emily just highlighted there, if we are just seeing maybe a bit of a stronger rebound here on the retail sales front-- this weaker data that we've been seeing?

MARK HAMRICK: Well, good news is always welcome. And so I think today's news was, on balance, good news. Also, we had a nice increase in the Philly Fed-- yet another regional Fed survey that was looking up. And it's also important, as you said, Zack, to acknowledge just how far we've come, let's say in the last year or so.

This jobless claims report marks exactly a year and a half since the downturn began that was related, obviously, to the pandemic. And you know, we can easily remember how horrific the economic data was in those early days going back to the 22 million jobs lost in March and April of last year. And whether you look at continuing claims, or the total number of individuals on some form of unemployment compensation, or the new jobless claims-- those are down by somewhere between 30% and 60% from a year ago.

So we're clearly making progress. And with the jobless claims here lately, we've also had some increases or volatility tied to tropical storm season with, of course, the biggest increases being seen there in the state of Louisiana over the past couple of weeks. So I think that we're going to continue to probably have some restraint to this portion of the economic recovery, with the hope that with more and more people getting vaccinated, with the Delta variant seeming to be peaking, sort of migrating that peak from the South and eventually to the Northeast, that perhaps we can get to a better place with all of that. But as we know, the pandemic has been able to produce more than just a few surprise storylines over this past more than year and a half.

ZACK GUZMAN: Yeah. And I guess, you know, that's kind of the big question is, you know, early in the pandemic, obviously, the unemployment claims were far higher, but you did have the support there, I guess, coming from the government-- we've seen that roll off now-- and the concerns around whether or not if things do get as bad as we've seen in past winters here in the pandemic-- last winter-- you know, how bad it could get for consumers out there when it comes to maybe pulling back right at a time when a lot of analysts have been expecting to see a boost in spending.

MARK HAMRICK: Obviously, you're right that some of the tailwinds that were related to federal stimulus are basically absent now-- the one exception being the child tax credit payments, which will continue on through the end of the year. And that's not nothing. But the other part is we have to remember that we are continuing to see improvement in the macro economy-- the unemployment rate now getting pretty close to 5%, down from the peak of nearly 15% at the official level.

And we made more progress there even though the August employment report wasn't, let's say, anything to write home about, per se, but obviously, the progress was seen with the unemployment rate. And there is an unintended consequence here, Zack, of having this restraint in the recovery at this point, which you touched on with respect to what will the Fed do or how will it do it.

And that is that we're essentially pushing out the recovery a little bit more through 2022, and we don't know how the whole federal spending piece is going to emerge with respect to not only the infrastructure bill, but the so-called soft infrastructure bill which doesn't seem to be destined to have a $3.5 trillion price tag attached to it. But I think there's reason for optimism.

And science does seem to be prevailing even though not all individuals are dialed into science and facts in this environment. But that is sort of the order of the day, and we are making a great deal of progress with respect to, you know, I think putting the worst of the pandemic behind us.

ZACK GUZMAN: Yeah, that is the hope. And obviously, the hope is that people do still pay attention to the science and the facts here driving some of the policies we've been seeing in this pandemic. But just to kind of wrap things up here, I mean, you've been kind of watching how the economy and the stock market here have kind of been leading one another, maybe, when you think about the timing of these recoveries and where we're at now-- you talked about maybe the Fed's timeline there and really pushing to see when they're going to start to taper.

But we were having this discussion pretty much all week in the way that the Fed has done a pretty good job, depending on who you talk to, about, I guess, telling people that this is going to come. They've been pretty clear on their timeline. So I mean, when you think about taper tantrums and what we saw in the past, I guess those concerns seem to be out of the window now given the way that they've telegraphed it.

MARK HAMRICK: Well, I would never say never with respect to the prospect of a possible tantrum of some kind, or just a correction that is appropriate just over the course of time. And I don't necessarily mean a 10% decline, but just the normal volatility that we haven't been seeing here lately in the stock market. But I think you're right.

I think the Fed has learned from some of the past, if you want to call it mistakes with respect to withdrawing stimulus or reducing stimulus over time. And obviously, Chairman Jerome Powell is trying to be quite cautious with all that. And I think for investors, one of the big takeaways here, maybe two, is that the Fed is continuing to supply accommodation, perhaps just not as much.

Those monthly asset purchases aren't going to go away in total this year, and interest rates may remain low for quite some time, particularly if inflation truly is transitory. And then the other part is, where are you going to put your money for the long-term? Interest rates and return on savings still very low, and so equities remain the best bet for the long-term for everyone who needs to save for retirement. And obviously, we've seen some enthusiasm with respect to that across cohorts with innovations in fintech and the like.

ZACK GUZMAN: That's been interesting to watch, too, in terms of how those expectations, particularly around inflation, have changed so quickly. But Mark Hamrick, Bankrate Senior Economic Analyst, appreciate you coming back on to chat with us today. Be well.