Jobless Claims Show Smallest Rise in Eight Weeks
Initial weekly unemployment claims now have slowed for the sixth straight week as small business confidence slid to its lowest level since March 2013. Although unemployment claims are still in the tens of millions due to COVID-19, there are a few flickers of optimism in the most recent data.
Weekly Initial Claims Slow for Sixth Week
The Department of Labor reported that for the week ending May 9, initial unemployment claims declined for the sixth straight week, but still saw an additional 2.981 million initial claims filed. It was the smallest increase in two months. With cumulative initial claims above 36.5 million and millions of continued claims, the U.S. unemployment rate is now estimated to be between 25.1% and 28.2%. The upper end of this range includes those recently considered to be out of the labor force.
In the Bureau of Labor Statistics’ most recent release for April, it was reported that 6.5 million people had left the labor force, compared to approximately 49,000 in September 2019, when the unemployment rate was 3.5%. The 6.5 million includes retired persons, students, those taking care of children or other family members and others who are not seeking work. This could artificially deflate the actual unemployment rate, as these people are no longer figured into the unemployment calculation.
The seasonally adjusted initial claims for the week ending May 2 were revised up to 3.176 million. Coupled with pre-pandemic claims and continued claims, the estimated number of unemployed people in the U.S. now sits between 39 million and 44 million.
By state, some of the largest non-seasonally adjusted initial claims from March 15 through the week ending May 9 were:
Forty states have now begun a phased reopening of their economies. Coupled with PPP funds distribution, further spikes in jobless claims should be curtailed at least for the next several weeks. While the total number of jobless claims is now staggering, they do not necessarily equate to permanent layoffs. Many who have filed have been furloughed or temporarily laid off, and some simply have seen their work hours reduced. Under expanded eligibility criteria approved by Congress, those who normally would not qualify are now able to file claims. This is substantiated by April’s employment report showing a robust 88.2% of workers who lost jobs in April were on temporary layoff, compared to 9.8% who were considered permanent job losers.
Small Business Optimism Index Better Than Expected
The National Federation of Independent Business reported this week that its Small Business Optimism Index dropped 5.5 points to 90.9 in April. While this is the lowest level since March 2013, it is still better than economists’ expectations. The index has decreased 13.6 points over the past two months amid the pandemic and associated closures. Those surveyed for this index cite an understanding that while the economy will continue to be awful in the short term, small business owners are more hopeful the corner will start to turn in the next several months.
For May, initial jobless claims should hover around 11 million for the month. Weekly claims should continue to decline to around 2 million weekly or less. A substantial deceleration in initial claims is forecasted to continue into June and July, based on the majority of states initiating their phased reopenings. The magnitude of the deceleration, however, will depend on how rapidly businesses bring back their employees.
ThinkWhy continuously monitors and forecasts labor data at all levels, measuring impact to MSAs and businesses across the country. Stay current with us. We are here to support organizations and provide insights during the economic downturn as well as the recovery phase.