The Labor Department’s weekly jobless claims report, the most timely data on the economy’s health, showed a surge to a record high in the number of people on unemployment rolls, suggested that businesses were probably in no rush to rehire workers as they reopen.
A broad shutdown of the country in mid-March to contain the spread of COVID-19, the respiratory illness caused by the CCP (Chinese Communist Party) virus, commonly known as the novel coronavirus, has resulted in the worst unemployment since the Great Depression.
“The states may be opening back up, but the labor market is still closed for millions across America and the loss of the income and spending of those without jobs will be a considerable headwind for this economic recovery,” said Chris Rupkey, chief economist at MUFG in New York.
Initial claims for state unemployment benefits fell 249,000 to a seasonally adjusted 2.438 million in the week ended May 16, the government said on Thursday. Data for the prior week was revised to show 294,000 fewer applications received than previously reported, bringing down the tally for the week ending May to 2.687 million from 2.981 million. The states of Connecticut said last week it had misreported its numbers.
Last week’s claims reading was in line with economists’ expectations, and marked the seventh straight weekly decline.
There was some encouraging news. A survey from the Philadelphia Federal Reserve on Thursday showed businesses in the mid-Atlantic region were increasingly optimistic, as the six-month outlook jumped to a 2-1/2 year high in May.
Gradual Decline
Claims have been gradually declining since hitting a record 6.867 million in the week ended March 28.Economists said claims numbers were staying high as states were now processing applications for gig workers and many others trying to access the federal government’s Pandemic Unemployment Assistance (PUA) program.
These workers generally do not qualify for regular unemployment insurance, but to get federal aid for virus-related job and income losses they must first file for state benefits and be denied.
Last week’s filings lift the number of people who filed claims for unemployment benefits to about 38.6 million since March 21.
Economists caution that this figure did not represent the number of jobs lost due to the pandemic, because of the technical difficulties and procedures at state unemployment offices. They also noted that this number could include people who have since found jobs.
Last week’s claims data covered the week during which the government surveyed establishments for the nonfarm payrolls portion of May’s employment report.
Claims dropped by 2 million between the April and May survey weeks. The economy lost a record 20.5 million jobs in April.
With the initial claims numbers being distorted by processing issues, attention has shifted to the number of people staying on unemployment benefits rolls. These so-called continuing claims numbers are reported with a one-week lag, but are considered a better gauge of the labor market.
Continuing claims could also offer a glimpse into how soon the economy ramps up. They can also gauge companies’ ability to get people off unemployment or keep workers on payrolls as they access their share of a historic fiscal package worth nearly $3 trillion, which offered loans that could be partially forgiven if they were used for employee salaries.
Continuing claims surged 2.525 million to a record 25.073 million in the week ending May 9.
“The sharp rise in continuing claims the week before illustrates that the easing of lockdowns in many states has not yet resulted in any large-scale recall to work for those currently on temporary layoff,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.
The government reported that 6.1 million people had their applications for the PUA program processed in the week ending May 2. An additional 2.227 million had submitted claims last week under the PUA program. A total of 27.282 million people were receiving benefits under state and federal government programs in the week ending May 2.
