Approaching Pre-Pandemic Level

• Initial claims for unemployment insurance fell for a seventh straight week in the week ending November 13.
• Continued claims fell for the seventh time in eight weeks in the week ending November 6.
• Both initial and continued claims are steadily moving toward their pre-pandemic levels.
• The labor market continues to recover from the Viral Recession. Job growth over the next year will depend on how quickly unemployed workers return to the labor force.

Initial claims for unemployment insurance fell for a seventh straight week as the labor market continues its recovery from the Viral Recession. Claims fell by 1,000 in the week ending November 13 to 268,000, the lowest level since mid-March 2020, at the very beginning of the pandemic. Claims for the previous week were revised up by 2,000, to 269,000. The four-week moving average of initial claims, which smooths out some of the volatility, fell to by almost 6,000 in the week ending November 13 to 273,000. The four-week moving average has fallen for six straight weeks and is also at its lowest level since the beginning of the pandemic.

Initial claims have been dropping over the past few months and are rapidly approaching their pre-pandemic level of around 200,000. Initial claims jumped 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 2020, then stabilized at between 700,000 and 900,000 between August 2020 and March 2021. Claims fell gradually but steadily this spring before stabilizing at around 400,000 per week, and then started to decline again in August.

The total number of people receiving benefits under regular state unemployment insurance programs (continued claims) fell to 2.080 million in the week ending November 6, from 2.209 million the previous week. Continued claims have fallen in seven of the past eight weeks.

The four-week moving average of continued claims fell to 2.157 million, from 2.257 million. These are the lowest levels for continued claims since March 2020, as the pandemic was first coming to the U.S. The four-week moving average of continued claims has fallen every week but once since late May as unemployed workers leave the rolls, either because their benefits have expired or because they have found a new job.

State continued claims peaked at more than 23 million in May 2020 and are gradually moving closer to their pre-recession level of around 1.7 million. With most people receiving benefits via pandemic-related programs until recently, continued claims under regular state programs had been less important as a labor market indicator. But those pandemic-related programs expired in September, and regular state continued claims are now more relevant.

The ongoing improvement in the U.S. labor market is clear in initial and continued unemployment insurance claims that are steadily falling and approaching their pre-pandemic levels. Demand for labor is very strong and workers are in short supply, so layoffs are very low right now. Those workers who do find themselves unemployed can quickly find new jobs. The biggest problem for the labor market in late 2021 is too few workers; there are about 3 million fewer people in the labor force now than there were before the pandemic.

Millions of people lost their unemployment insurance benefits in September, or saw their benefits drop, as special pandemic-related UI programs expired. The expectation is that these people will soon reenter the labor force, relieving some of the labor shortages and allowing for stronger job growth. But labor force participation barely budged in September and October after the expiration of these benefits. Job growth in 2023 could be weaker than expected if these potential workers are slow to return to the labor force.

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