Initial and continuing claims for unemployment insurance both fell slightly in the latest data. Both claims measures have been falling for the past couple of months, after spiking in the spring as the coronavirus pandemic struck the U.S. However, the rates of decline for both initial and continuing claims are slowing, suggesting that the pace of labor market improvement is softening. In addition, claims can be volatile around holidays.

Initial claims for unemployment insurance were 1.314 million in the week ending July 4, down 99,000 from the previous week (revised slightly lower to 1.413 million, from 1.427 million). After peaking at 6.62 million in late March, initial claims have fallen for 14 straight weeks. However, the pace of decline has slowed over the past few months, meaning that although layoffs are falling, the rate of improvement has slowed. Claims are still running about six times higher than they were in early 2020 (around 210,000 per week). The July 4 holiday may have distorted the claims data.

Continuing claims fell 530,000 in the week ending June 27, to 18.062 million. Continuing claims for the prior week were revised lower to 18.760 million, from 19.290 million. Continuing claims peaked at almost 25 million in early May, and have fallen in six of the past seven weeks. However, continuing claims are about 10 times higher than they were earlier in the year, indicative of very high unemployment. And, as with initial claims, the pace of decline in continuing claims is also slowing; this suggests that fewer of the unemployed are moving back into employment.

After losing 22 million jobs in March and April due to the Viral Recession, the US economy added back about one-third of those jobs in May and June. But both initial and continuing claims for unemployment insurance suggest that the pace of improvement in the labor market is slowing, and job growth going forward will be weaker. It is unclear if recent increases in reported coronavirus cases in many parts of the country will weigh on job growth, but it is certainly an ominous sign for the labor market.

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