But Unemployment Still Elevated

• Initial unemployment insurance claims fell to 360,000 in the week ending July 10, to their lowest level since before the pandemic. Initial claims remain far above their pre-pandemic level, however.
• The number of total unemployment insurance beneficiaries fell below 14 million in the week ending June 26, their lowest level since the federal government expanded the UI program in the wake of the pandemic. This is far above the 2 million in early 2020, and unemployment remains widespread.
• The U.S. labor market will continue to improve through the rest of this year and in 2022.
  

Initial claims for unemployment insurance fell to 360,000 in the week ending July 10, down 26,000 from the previous week (revised up to 386,000, from 373,000). The four-week moving average of claims, which smooths out some of the volatility, fell to 382,500 in the week ending July 10, down from 397,000. The four-week moving average of claims has fallen in 20 of the past 23 weeks. Both weekly initial claims and the four-week moving average are at their lowest levels since March 2020, when the pandemic was just coming to the United States.

Initial claims jumped from 200,000 per week in early 2020 to more than 6 million in April of last year as the pandemic came to the U.S. They then fell quickly to around 900,000 per week by early August, then stabilized at between 700,000 and 900,000 between August and March. But since the spring claims have gradually but steadily fallen to below 400,000 per week. This is still about double their pre-pandemic level, however.

Initial claims under the Pandemic Unemployment Assistance Program fell to 96,000 in the week ending July 10, down from 101,000 the previous week (not seasonally adjusted). PUA initial claims peaked at 1.3 million in May 2020 as the program got underway in response to the pandemic.

There were a total of 13.837 million people receiving some form of unemployment insurance benefit in the week ending June 26, down from 14.209 million the previous week (not seasonally adjusted). This is the lowest number of beneficiaries since April 2020, as the pandemic was starting to wreak havoc on the U.S. economy. But it is still many times the approximately 2 million weekly continued claims in early 2020, before the pandemic. Total continued claims peaked at 33.2 million in June 2020.

Continued claims under regular state UI programs fell to 3.241 million in the week ending July 3, down from 3.367 million the previous week. This is the lowest level for continued claims since before the pandemic, and down from a peak of more than 23 million in May 2020. But continued claims are well above their pre-recession level of around 1.7 million, and the pace of improvement has slowed in 2021. With most people receiving benefits via pandemic-related programs, state continued claims have become less important as a labor market indicator.

Data from both initial and continued unemployment insurance claims indicate continued improvement in the U.S. labor market in mid-2021 but also continued high unemployment. Initial claims are gradually falling as layoffs slow, but they remain well above their pre-pandemic level. And there are almost 14 million people receiving some form of unemployment insurance benefit, up from around 2 million before the pandemic.

The U.S. economy added 850,000 jobs in June, above expectations, and has added an average of 567,000 jobs over the past three months. At this pace employment would return to its pre-recession peak by mid-2022. One factor that may be restraining job growth is tight labor supply. A number of factors are restraining labor supply growth in mid-2021, including childcare difficulties, continuing concern over catching the coronavirus, and higher unemployment insurance benefits that may be leading some job seekers to be choosier in taking a new job. Some states have stopped providing these extra benefits, with more to do so shortly; they are set to expire nationally in September. This could lead to more people entering the workforce, although there’s little evidence of that so far in state-level data. PNC expects job growth to average better than 600,000 per month through the rest of this year.

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