Home Economic Trends Unemployment Benefit Claimants Declining Slowly – Robert Hughes (10/12/2020)

Unemployment Benefit Claimants Declining Slowly – Robert Hughes (10/12/2020)

NOTE: In response to recommendations resulting from an internal review of state operations, the state of California has announced a two week pause in its processing of initial claims for unemployment insurance benefits. The state will use this time to reduce its claims processing backlog and implement fraud prevention technology. Recognizing that the pause will likely result in significant week-to-week swings in initial claims for California and the nation unrelated to any changes in economic conditions, California’s initial claims published in the UI Claims News Release will reflect the level reported during the last week prior to the pause. Upon completion of the pause and the post-pause processing, the state will submit revised reports to reflect claims in the week during which they were filed.

The number of ongoing claims for state unemployment programs totaled 11.561 million for the week ending September 19, down 802,427 from the prior week (see first chart). For the same week in 2019, ongoing claims were 1.381 million. Continuing claims from state programs continue to trend lower since hitting a peak in March. Continuing claims in all federal programs totaled 13.944 million for the week ending September 19. The total number of people claiming benefits in all unemployment programs including all emergency programs was 25.505 million for the week ended September 19, down 1.003 million from the prior week. While there has been improvement from the catastrophic events in March and April, the current level of continuing claims is still massive (see first chart).

Initial claims for regular state unemployment insurance totaled 840,000 for the week ending October 3, down 9,000 from the previous week’s tally of 849,000 (see second chart). The four-week average was 857,000, down 13,250 from the prior average. The latest week is the 29th week of historically massive claims. Prior to the lockdowns, initial claims were running around 230,000 (see second chart).

The number of initial claims surged in the initial phase of government lockdowns, hitting almost 7 million for the week ending March 28. Initial claims declined fairly rapidly over the next 10 weeks but since early June, the declines have slowed significantly with some weeks showing slight increases. Persistent initial claims at such a historically high level remain a very troubling sign for the labor market recovery and the economy.

Government-imposed restrictions intended to slow the spread of Covid-19 continue to wreak havoc on the economy and the labor market. The longer consumers remain restricted and businesses remain closed or limited, the more uncertain a labor market recovery becomes and the higher the probability of a slow and drawn-out economic recovery.