September 24, 2020 – The Labor Department reported this morning that 870,000 more Americans filed new claims for state unemployment benefits last week. Economists polled by Dow Jones expected first-time claims to come in at 850,000, down slightly from the 860,000 claims reported for the previous week. The latest figures portend an unstable and volatile job market.
The Labor Department changed its methodology from one that used seasonal adjustments to account for normal disruptions in the job market that don’t apply as much under current virus-related conditions.
“We’re continuing to see healing in the labor market, but the pace by which we’re seeing recovery is slowing,” said Kathy Bostjancic, an economist at Oxford Economics.
“The current picture suggests that growth has slowed sharply in the past three months, and that the labor market is stalling again in the face of rising infections and the sudden ending of federal government support to unemployed people,” said Ian Shepherdson, chief economist for Pantheon Macroeconomics.
“Claims, arguably the most important high frequency data point currently, missed expectations and moved up,” Dennis DeBusschere, an analyst at Evercore ISI, said in a note.
Thursday’s data comes as U.S. lawmakers struggle to move forward with a new fiscal stimulus package, something economists and the Federal Reserve argue is needed for the economic recovery to continue.
On Wednesday, Fed chairman Jerome Powell called for more fiscal support, telling lawmakers: “We’ve come a long way pretty quickly, and that’s great. But there’s a long way to go. So, I just would say we need to stay with it, all of us. The recovery will go faster if there’s support coming both from Congress and from the Fed.”
During the week, 50 states reported 11,510,888 individuals claiming Pandemic Unemployment Assistance benefits and 49 states reported 1,631,645 individuals claiming Pandemic Emergency Unemployment Compensation benefits. The highest insured unemployment rates in the week were in Hawaii (19.8), California (15.7), Nevada (14.9), Puerto Rico (14.1), New York (13.7), Louisiana (13.2), District of Columbia (11.3), Georgia (11.3), the Virgin Islands (11.3), and Massachusetts (10.5). The largest increases in initial claims for the week were in Indiana (+1,990), Kansas (+1,928), Illinois (+1,906), and Michigan (+1,727), while the largest decreases were in California (-17,400), Texas (-15,905), Louisiana (-8,384), Georgia (-8,235), and Washington (-3,291).
Six months into the pandemic, the sluggish rate of recovery has led to a spike in corporate discussions about permanent job cuts, with nearly half of businesses who have already announced furloughs or layoffs saying they expect to make further adjustments in the next 12 months, according to a recent survey by Randstad RiseSmart, an outsourcing firm.
Prior to the pandemic, 86 percent of employers were not planning to conduct separations, said the survey, but the devasting effects of the crisis on the U.S. economy forced drastic, widespread changes in talent strategies. During the peak of the pandemic in April, the unemployment rate rose from a low of 3.5 percent in February to a record high of 14.7 percent. In fact, in recent months, unemployment rose much higher than it did in the two years of the Great Recession.
Another Million File for Unemployment Benefits
After coming in under the one million mark for one brief week, new jobless claims registered over a million for the second straight week as COVID-19 continues to impact the U.S. economy. Let’s take a look inside the numbers as Keith Macomber of Capitus Associates weighs in!
“The COVID-19 pandemic has posed unforeseen economic burdens on organizations across various industries, leading many employers to make the tough decision to lay off and furlough talent as a result,” said Dan Davenport, president and general manager of Randstad RiseSmart. “While it is a positive sign that the unemployment rate is starting to decrease, we are still in the midst of this pandemic, and based on our survey results, more coronavirus-related layoffs could be on the horizon.”
“Although the pace of recovery has been gradual, there is evidence that the U.S. economy is rebounding,” Mr. Davenport said. “The latest Bureau of Labor Statistics jobs report found the unemployment rate decreased to 10.2 percent in August, and more businesses have been given the green light to reopen, leading to an uptick in open positions and an increase in consumer spending. Some industries have been impacted more than others and may either take longer to recover or will not fully recover. For example, even before COVID-19, the brick-and-mortar retail sector was already facing projections of massive job losses. The current environment has accelerated that trend.”
“The travel and hospitality industry is likely to recover at a slower pace. Just last week, American Airlines announced major layoffs, as airline passenger volumes aren’t projected to return to 2019 levels until 2023 or 2024,” said Mr. Davenport. “While it isn’t clear when the U.S. economy will fully recover, an important indicator will be the ability for states across the country to keep infection rates low, giving employers the confidence to reopen offices and ramp up hiring.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media