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Friday, April 16, 2021
Initial claims slowly start moving lower
When the COVID-19 pandemic rapidly descended on the U.S. economy in the winter of 2020, one of the first economic data points that captured the sheer scale of the looming disaster was weekly initial jobless claims.
For the week ending March 21, 2020, initial claims skyrocketed to record-breaking levels as lockdowns roiled the jobs market. At their peak in April 2020, more than 6 million Americans made first-time claims for unemployment assistance in a single week. And for 20 weeks in a row, more than a million people filed initial jobless claims.
But as the economy re-opens and the vaccine continues to be rolled out, life has slowly begun normalizing in the U.S. Now, we are starting to see signs that this data — after having remained stubbornly high for months — is starting to moderate, finally.
On Thursday, we learned that for the week ending April 10, some 576,000 Americans filed for unemployment insurance. This is the lowest number since the week ended March 14, 2020, when the pandemic first began throttling the economy.
Last week also marks the first time since the beginning of the pandemic that the number of people filing for unemployment insurance fell below the peak of 665,000 weekly claims seen after the financial crisis.
"We expect the trend in claims to be downward as the labor market recovery gathers momentum," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics. "The four-week moving average will be a better guide to the trend, and in the latest week the four-week moving average fell 47,250 to 683,000, also the lowest since March 14, 2020."
To be sure, some of Thursday's data reflects the impact from Easter, and economists expect that there could be some give back in the data in the weeks ahead. Additionally, as of March, total employment in the U.S. was still more than 8 million below February 2020 levels. In short, the labor market recovery still has a very long way to go.
The claims data series has been, and also remains, one of the noisiest out there. As my colleague Emily McCormick flagged on Thursday, economists over at JPMorgan last weekend suggested that recent claims numbers may be inflated.
"Historically, about 45% of initial claims resulted in a first payment of benefits," JPMorgan economist Michael Feroli said in a note. "Over the last few months, fewer than 25% of initial claims generated a first payment of benefits. Why is this so? One reason may be that the $300 weekly bonus payments are encouraging more people to give filing a shot—the payoff from a successful claim is significantly greater than before the pandemic."
And with the most recent data on continuing unemployment claims — which captures folks who have applied for and received at least one week of unemployment insurance — still coming at 3.7 million, distress in the labor market remains.
But some of the darkest clouds hanging over the U.S. employment picture are indeed staring to clear.
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