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Analysts were surprised by an unexpected jump in people filing for unemployment benefits last week, but the increase may just be the result of normal temporary layoffs in the auto industry, analysts say, while jobless claims remain flat over the summer following several months of declines.
419,000 people filed for unemployment benefits last week, an increase of 49,000 over the previous week, according to the Labor Department, and around levels last seen in June.
The spike is the result of carmakers temporarily shutting down their factories to switch production for the next year—an annual occurrence—said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note responding to the news.
Regions with spiking Covid-19 rates will probably add jobs more slowly, Shepherdson said, but on a national level, their slowdown will be offset by densely populated areas with high vaccination rates, such as the Northeast and California, which “will continue to grow rapidly.”
“In one line: Don’t panic!,” Shepherdson wrote. “When the distortions in the data fade,” which he expects to happen in August, “we expect to see that claims are still heading down, as economic activity gathers pace.”
The increase in first-time claims follows the previous week’s report that claims had fallen lower than any time since the coronavirus pandemic first took hold of the economy in March 2020. Some employers and governors argue that expanded unemployment benefits have kept people from looking for jobs, but recent data suggests that is not true.