Jobless Claims Rise Above Expectations, Suggesting Bumpy Road to Labor Market Recovery

People who lost their jobs wait in line to file for unemployment benefits, following an outbreak of the coronavirus disease, at Arkansas Workforce Center in Fort Smith, Ark., on April 6, 2020. Nick Oxford/Reuters

The number of American workers seeking unemployment benefits last week jumped to 419,000, well above expectations and a sign of a bumpy labor market recovery as the economy bounces back from pandemic lows.

Initial filings for unemployment insurance, a proxy for layoffs, came in at 419,000 for the week ended July 17, the Labor Department said in a release (pdf) Thursday, an increase of 51,000 over the previous week’s level. Economists polled by Reuters predicted 350,000 applications for the latest week.

“As with the recent resurgence in COVID cases stemming from the Delta variant, the jump in jobless claims is a disappointment,” said Bankrate senior economic analyst Mark Hamrick, in an emailed statement. “Recovery is never a perfect straight line.”

At the same time, the number of people continuing to receive unemployment benefits through regular state programs fell to 3.2 million, the lowest level since March 2020.

Also, the number of people receiving jobless benefits in all programs, including supplemental pandemic unemployment compensation programs, fell by nearly 1.3 million for the week ending July 3, although it remains high.

“The total number of individuals on some form of unemployment assistance remains historically elevated at nearly 12.6 million. But that total should decline sharply in a couple of months as the federal pandemic programs expire,” Hamrick said.

While the supplemental federal pandemic jobless compensation programs are set to expire in September, some two dozen states have chosen to opt out early, with Republican leaders and some economists blaming generous unemployment benefits for sidelining workers and adding to business hiring woes.

Democrats, the Biden administration, and some economists have argued that the impact of the jobless benefit boost has had a negligible impact on hiring, and instead blamed concerns of COVID-19 infection and child care challenges for keeping workers from taking jobs.

Meanwhile, the number of job openings in the United States—a measure of labor demand—rose to a record high in May to 9.2 million, according to the Labor Department’s most recent monthly Job Openings and Labor Turnover Survey, or JOLTS report, released on July 7 (pdf).

At the same time, American companies in June hired the most workers in ten months, in a tentative sign that the labor crunch hanging over the economy and driving businesses to boost wages and offer perks to attract workers, was starting to ease.

The economy created 850,000 jobs in June, after adding 583,000 in May, according to the Labor Department’s nonfarm payrolls report, released on July 2.

Some economists have blamed the rise in last week’s jobless claims on natural fluctuations in week-to-week data and some one-off factors, such as GM announcing it was shutting down truck production in Michigan due to supply shortages.

“I do not worry that this reading signals a sudden weakening in labor demand,” Stephen Stanley, an economist at Amherst Pierpont Securities, told The Associated Press. “In fact, I am quite confident that it does not.”