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PNC Chief Economist Gus Faucher: Initial Claims for Unemployment Insurance Fall for Third Straight Week

Michigan Business Network
February 4, 2021 4:00 PM

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But Remain Very High
  • Initial claims for unemployment insurance fell in the week ending January 30, the third straight decline. Claims remain well above their pre-pandemic levels, however.
  • The number of people receiving any form of unemployment assistance fell by almost 500,000 in the week ending January 16 but was still almost 18 million. The number of unemployed remains extremely high.
  • PNC expects weak job growth of 50,000 in January when the BLS releases the monthly jobs report on Friday, February 5.

Initial claims for unemployment insurance were 779,000 in the week ending January 30, down 33,000 from the previous week. Claims for the week ending January 23 were revised lower by 35,000, to 812,000. The four-week moving average of claims, which smooths out some of the volatility, fell by 1,000 to 829,000 in the week ending January 30.

Initial claims were 200,000 per week in early 2020, before the pandemic, then soared to almost 7 million in late March. They steadily declined through the summer and fall to below 800,000 per week in November but rose to above 800,000 in December and January as the pandemic re-intensified.

The drop in initial claims at the end of January could be an indication that layoffs are slowing as coronavirus cases decline. Initial claims can be volatile, however, so it will take a few weeks to determine if claims are actually falling.

The total number of people receiving any form of unemployment insurance, including those receiving benefits from special pandemic-related programs, fell to 17.836 million in the week ending January 16. This was down almost 500,000 from the previous week. The total number of beneficiaries has fallen steadily since peaking at 32 million in June but remains extremely elevated. There were about 2.1 million people receiving some form of unemployment benefit at this time last year.

The number of beneficiaries under regular state unemployment insurance programs (continuing claims) fell by almost 200,000 in the week ending January 23, to 4.592 million. Continuing claims been falling steadily after peaking at 25 million in June. Some of the decline has come from people leaving unemployment for work, but much of the recent drop has come from beneficiaries using up their eligibility and moving to special pandemic-related programs.

Although the labor market has improved since April, layoffs remain far above their pre-pandemic level, unemployment remains extremely elevated, and the pace of job growth has slowed dramatically since the beginning of the labor market recovery in May. Employment actually declined by 140,000 in December, the first month of net job losses since April.

However, December job losses came entirely in the leisure/hospitality services industry, primarily in bars and restaurants; other industries added about 360,000 jobs on net. The resurgence in the pandemic at the end of 2020 and additional state restrictions on economic activity led to more business closures, either permanent or temporary.

PNC expects modest job growth of 50,000 in January when the Bureau of Labor Statistics releases the monthly jobs report on Friday, February 5. PNC also expects a slight increase in the unemployment rate in February to 6.8%, from 6.7% in November and December. Job growth will remain weak in the near-term as the economy continues to deal with elevated coronavirus cases. But job growth should pick up by the spring and strengthen through the rest of this year as vaccine rollout, stimulus efforts, and warmer weather lead to a strong economic recovery. The potential for additional stimulus is an upside risk to the labor market outlook for 2021.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

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