Employment is expected to rebound again in this week’s update on payrolls in July, but it’s still premature to equate positive monthly hiring comparisons with an all-clear signal for the labor-market and economic outlook. A more reliable measure of what’s brewing can be found in two weekly reports: initial and continuing jobless claims. On both fronts, the numbers are still flashing warnings.

Let’s start with the good news. Today’s ADP Employment Report for July, which tracks private-sector employment, is expected to dispense another positive comparison. Economists are expecting a strong gain and Friday’s official payrolls data for last month is also on track to report a hefty increase. Good news, but context is needed and on that front the results suggest a wary optimism, at best, is still warranted.

For payrolls, the main issue is that even historically large monthly increases still leave a deep hole after the far-deeper losses in March and April. July’s report looks set to post another strong rebound, but the net loss will remain steep.

It doesn’t help that the pace of the labor market’s bounce is slowing. For example, Friday’s government report on payrolls for July is expected to post a rise of 2 million jobs – down sharply from 4.8 million in June, according to Econoday.com’s consensus forecast. The risk here is that only a small share of the roughly 22-million-plus losses in March and April has been replaced. As a result, even if Friday’s forecast is accurate, the challenge of filling the hole will remain steep.

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The numbers in the weekly jobless claims reports are a valuable leading indicator for managing expectations but on this front the trend isn’t encouraging. Although claims have fallen sharply from the mind-numbing 6.8 million (seasonally adjusted) peak in the last week of March, the number of newly unemployed workers filing for relief remains sky-high (by historical standards) and the deceleration’s pace is faltering.

Some observers criticize the claims data, noting that funky seasonal adjustments are skewing the trend. Perhaps, but the raw, unadjusted numbers also reflect a worrisome trend.

Consider the chart below. Initial claims, whether seasonally adjusted or raw, tell one story: more than one-million workers are losing their jobs every week and the rate of descent from the peak is slowing. Even worse, recent updates suggest the trend is stabilizing at a high level. If true, the labor market’s outlook remains dire as weekly unemployment numbers continue to swell.

A similar narrative applies to continuing claims, for both adjusted and unadjusted figures. Relative to the pre-coronavirus levels, recent updates suggest that progress on paring the number of unemployed workers receiving benefits has stalled at a dangerously high level. In fact, the latest continuing claims data point edged up vs. the previous week.

“The increase in continued claims suggests that rehiring may be pausing as the rise in COVID-19 cases causes more businesses to shut down or scale back reopening plans,” observes economist Nancy Vanden Houten of Oxford Economics in a research note sent to clients.

Relief isn’t expected in this week’s update for claims. Econoday.com’s consensus point forecast sees initial claims (seasonally adjusted) picking up to 1.442 million. The lowest estimate is 1.380 million – better, but still crushingly high.

The longer that workers lose their jobs at record-high levels, the greater the threat to the US economy. It’s unclear how long the economy can withstand such a deep macro shock, but it’s safe to say that this is a substantial risk factor that, for the moment, doesn’t appear to be fading.

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