The number of people filing for initial jobless benefits is forecast to drop for the third week out of four after jumping above 1 million in the middle of August.
Filings for unemployment insurance are expected to be 850,000 in the September 11 week after the prior week (Sept 4) was revised from 881,000 to 884,000 matching the August 28 report.
Continuing claims are expected to slip to 13 million in the September 4 week, from 13.385 million previous.
The manufacturing purchasing managers’ index (PMI) unexpectedly climbed to 56 in August from 54.1 in July. It is now well ahead of its position in February at 50.1 after the completed US-China trade deal brought it back into expansion. The new orders index, the measure of future business, soared to 67.6 in August from 61.5 in July and is now well beyond the 49.8 pre-Covid-19 level of February, The consensus forecast had been for a drop to 53.5.
Service sector sentiment skidded to 56.9 in August from 58.1in July and 57.1 in June. Nonetheless the 57.4 average for the past three months is superior to the 55.2 average for the five months (October-February) before the closures shut the US economy. The new orders index fell to 56.8 in August but the July score of 67.7 was the highest on record.
Services new orders
The employment indexes in both sectors are lagging the surge in activity and new business. Manufacturing rose to 46.4 in August just below its 46.9 reading in February. The services employment index was 47.9 in August, far less than the 55.6 February reading but not nearly as weak as the 31.9 forecast.
The Fed’s adoption of inflation averaging as a guide to rate policy underlines the bank’s long-term concerns for the health of the post-Covid-19 US economy. The purpose of the change is to let the FOMC focus on its primary mandate of employment and economic growth.
The US economy currently is a two-tier labor economy. Payrolls gained 1.371 million in August the fourth monthly increase bringing the rehires to 47.8% (10.595 million of 22.160 million) of NFP layoffs. The unemployment rate dropped to 8.4% in August down from a high of 14.7% in April and has improved much faster than the Fed anticipated.
But the return of many workers has not stopped the job losses and initial jobless claims averaged 970,000 in the latest (September 11) week.
Initial claims 4-week moving average
Jobs disappear as small businesses continue to perish from the cumulative effects months of low or non-existence consumer traffic in restaurants, retail, travel, hospitality and other service industries..
The US economy is still growing despite the drag from specific industries. Markets are awaiting evidence that the recovery is ready for the entire economy.