Initial claims for regular state unemployment insurance rose in the latest week and the prior week was revised higher, falling short of expectations for a drop to 700,000. Initial claims totaled 770,000 for the week ending March 13, up 45,000 from the previous week’s upwardly revised tally of 725,000 (see first chart). The latest week extends the run of claims within the 700,000 to 900,000 range and remains well above the pre-pandemic level of 212,000 in early 2020 (see first chart). Despite the disappointing results, the outlook for the economy and the labor market are improving as ongoing distribution of vaccines is leading to further easing of government restrictions on consumers and businesses.
The four-week average fell 16,000 to 746,250, the sixth weekly decline in a row and the lowest level since November 28. However, the four-week average remained in the 700,000 to 900,000 for the 29th consecutive week. As businesses reopen and hiring accelerates, initial claims for unemployment benefits are likely to move significantly and sustainably lower.
The number of ongoing claims for state unemployment programs totaled 4.548 million for the week ending February 27, down 260,822 from the prior week and the lowest level since March 21, 2020. State programs had been trending lower since early May, but the downward trend has turned to a flattish-to-slightly-lower trend since November, decreasing by an average of 93,122 per week over the past 16 weeks (see second chart). For the same week in 2019, ongoing claims were 2.054 million.
Continuing claims in all federal programs fell in the latest week, coming in at 13.669 million for the week ending February 27 (see second chart). Since the beginning of June 2020, continuing claims in all Federal programs have been in the 12 to 16 million range, averaging 14.053 million.
The total number of people claiming benefits in all unemployment programs including all emergency programs was 18.216 million for the week ended February 27, down 1.902 million from the prior week. Total claims have been in the 16 to 20 million range since November (see second chart).
Government restrictions on consumers and businesses continue to distort economic activity. However, the distribution of vaccines is leading to sharply less government restrictions and is supporting rising expectations for the economy. Significant damage has been inflicted on the economy, households, and businesses by the government lockdowns. While the outlook for activity is improving as restrictions are removed, it may be quite some time before all the damage has been mitigated.
This article was first published by the AIER, and can be found here.
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