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Zillow Market Pulse: June 25, 2020

mattspeakman

June 25, 2020

Unemployment insurance claims have seemingly stabilized at historic highs. Jobless claims are rising in emerging coronavirus hotspots. And more evidence is appearing that lower-income households are bearing the brunt of job losses.

  • Jobless claims show no signs of stopping

    • 2.2 million claims for unemployment benefits were filed last week.
    • More than 33 million people are either receiving unemployment assistance or have recently applied.
  • 14 weeks into the pandemic, the labor market situation is stabilizing but not improving

    • While overall employment increased in May, 9.3 million people still lost their job last month.
    • Sharp increases in jobless claims are popping up in some states with recent surges in new coronavirus cases.
  • Lower-income households more severely impacted by the weak labor market

    • Through mid-April, more than a third of workers in the bottom income quintile lost their job, compared to less than 10% of higher-income workers.
    • Government assistance has helped low-income families continue to spend.

 So what?

Another 2.2 million people applied for unemployment aid last week, and while jobless claims have seemingly leveled off, they've done so at a historically high point roughly ten times more than the typical number of claims filed in a week before the pandemic. This far into the crisis it's easy to get lost in some of the historically grim numbers, but it's important not to get fatigued: Despite levels stabilizing, things remain extremely challenging — and true improvement is a ways off. About 33 million people are either receiving benefits or have recently applied and are awaiting receipt. Of those, about a third are receiving aid through the Pandemic Unemployment Assistance (PUA) program – reinforcing just how crucial it was that the federal government enacted that program in the early stages of the U.S. coronavirus outbreak.

Where we go from here in the labor market remains uncertain. Those who are optimistic about the outlook for the labor market will likely point to the fact that the economy added 2.5 million jobs in May and that the national unemployment rate fell on the month (despite remaining historically high). But a net increase to employment doesn't necessarily mean all is well in the job market, and glosses over the fact that millions of people remain out of work and are continuing to lose their jobs. While overall employment increased in May, 9.3 million people lost their job that month. As states and businesses continue to reopen, it's possible that we will see a similar statistic in next Friday's June employment report. But the recent surge in coronavirus cases in some states has begun to have a negative impact on local labor markets: Florida, Arizona and California all saw notable increases in jobless claims this week, a trend that will certainly accelerate should these states be forced to slow their reopening plans, or even shut back down. So while the broader picture of the labor market – and the economy – is showing that the recovery is underway, significant economic strife remains and continues to build.

And evidence that this lingering/mounting labor market strife is impacting broader economic factors is starting to emerge. A report from the Brookings Institution found that the hardship imposed on many U.S. households is particularly acute for those at the lower end of the economic spectrum. Through mid-April, more than 35% of workers in the bottom quintile of the wage distribution lost their employment at least temporarily as a result of the pandemic. The share of higher-income workers who lost their jobs was still high, but far lower — just 9%. What's more, a large share of workers who remained employed took a pay cut – something that not only introduces more hardship due to lost income, but also makes applying for full unemployment benefits more challenging. Currently, government support is helping to soften the blow and ensure that lower-income households have the means to stay afloat. A separate report from Brookings shows that spending among low-income households actually rose in the 6-week period ending May 30 compared to the same period in 2019, almost entirely because of government support. Absent this support, income for this group would have fallen more than 20% year-over-year, far greater than for those in higher income buckets. With the employment situation failing to show marked improvements, it seems likely that fiscal stimulus will need to continue in order to keep these households afloat.

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