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PNC's Gus Faucher: Initial Unemployment Insurance Claims Increase Again

Michigan Business Network
February 18, 2021 1:00 PM

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Labor Market Recovery Remains Stalled in February

Initial claims for unemployment insurance by 13,000 in the week ending February 13 to 861,000. Claims for the prior week were revised significantly higher by 55,000 to 848,000, from 793,000. The four-week moving average of claims, which smooths out some of the volatility, fell by around 4,000 to 833,000. Initial claims are likely to rise in the week ending February 20 because of bad winter weather and power outages in much of the country.

Initial claims have been running around 800,000 to 900,000 per week in 2021, up from around 700,000 to 800,000 in late 2020. Layoffs have increased this year as coronavirus cases have risen. Initial claims were around 200,000 per week in early 2020, before the pandemic, then surged to a peak of almost 7 million in the early spring as the pandemic came to the U.S. They fell steadily in the spring and summer, but have were flat in the fall, before moving somewhat higher in 2021.

Total claims under all unemployment insurance programs, including pandemic-related programs, were 18.340 million in the week ending January 30, down 1.326 million from the previous week (not seasonally adjusted). The number of people receiving some form of unemployment benefit peaked at more than 32 million in June, then declined to around 18 million by the end of 2020. Since then claims have stabilized, in part because of a softer labor market, in part because of issues with claiming benefits in the wake of program expiration and then reauthorization at the end of 2020. Total beneficiaries were around 2 million in early 2020, so the number of unemployed remains extremely elevated.

There were 4.494 million people receiving unemployment benefits under regular state programs in the week ending February 6, down 64,000 from the previous week. After peaking at almost 25 million in June, the number of claims for regular state programs has steadily declined. Some of the decline has come from people moving from unemployment to employment, but some has also come from beneficiaries using up their eligibility and moving into pandemic-related programs. Before the pandemic, continuing claims were about 1.7 million per week.

After monthly job growth in the millions in May through August, the U.S. economy added an average of just 30,000 jobs per month in the three months through January. Rising coronavirus cases and fading fiscal stimulus weighed on job growth in late 2020 and early 2021. But job growth should pick up throughout 2021 and end the year very strong. Congress passed new fiscal stimulus at the end of 2020 that contributed to a big increase in retail sales in January, housing and business investment are solid, coronavirus cases are falling, and vaccine distribution continues. In addition, further fiscal stimulus is likely from a Democratically controlled Congress and the Biden administration.

One issue policymakers will need to address in the scheduled expiration of pandemic-related unemployment benefits in mid-March. With tens of millions of people still receiving unemployment insurance, the loss of these benefits would put a huge dent in consumer spending.

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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