Initial weekly Unemployment Insurance claims were reported at 881,000 by the U.S. Department of Labor, down from the week before, but a portion of the decline was due to methodology changes. Seasonally adjusted initial claims dropped to 881,000 for the week ending August 29, the lowest reported total since the beginning of the COVID-19 pandemic. Cumulative claims for the week ending August 22 were 13.3 million, also the lowest in months.
The DOL changed its methodology for seasonally adjusted data for this week’s release, contributing to some of the decline in reported claims. The reason for a seasonal adjustment is to more accurately reflect surges in hiring and layoffs that occur routinely throughout the year. Because these normal surges often come around holiday time or the beginning and ending of summer, the seasonal adjustment keeps observers from panicking – or celebrating – once these seasonal factors kick in. The previous methodology simply could not adjust for the impact and timing of the pandemic to the DOL’s satisfaction, so it made the adjustment to more accurately track the seasonal fluctuations.
At first blush, it appears a lot of people found jobs in the last week, particularly with the continued claims number dropping more than 1.2 million since the last report. That assumption was not entirely true, however, as it was expected that the new methodology would lower the number of seasonally adjusted claims. In the end, one can simply look at the raw, non-seasonally adjusted data to get the gist of the trend. The following chart combines initial and cumulative claims without adjustments and compares 2020’s level to 2019 for each week through late August. Seasonal adjustments aside, the labor market has a lot of ground to make up to get back to pre-pandemic levels.
August job data will be released tomorrow, and it is expected that approximately 1.3 million jobs were added during the month. That would be down from the roughly 1.8 million jobs added in July, and it reflects concerns that the economic recovery continues to slow as the pandemic drags on. The updated supplemental federal unemployment benefits now provide $300 per week, down from the $600-per-week benefit that lasted through July. Unemployment Insurance is a state-run program, and to date, 45 states have applied and been approved for FEMA’s supplemental financial assistance program. This is seen as not only a lifeline to those receiving the benefit, but as also stimulating the economy and preventing even more job loss.
Due to the prolonged economic impact of COVID-19, LaborIQ® by ThinkWhy now estimates unemployment at 15.9% using Unemployment Claims, and the number of unemployed persons remains little changed despite the drop in reported initial claims.
Weekly unemployment claims indicate the pandemic continues to inhibit the economy’s rebound, but the labor market is still progressing. LaborIQ by ThinkWhy expects initial jobless claims for September to hover around 4.4 million, but that number will be adjusted as we understand more about the methodology changes described earlier in this report. Additional federal aid is available to unemployed workers, but it’s only half of the initial supplemental benefit. While the road ahead remains uncertain, falling unemployment insurance claims continues pointing toward some degree of economic progress, albeit slower than we prefer. The August jobs report will be another significant indicator of the economy’s momentum.
ThinkWhy continuously monitors and forecasts labor data at all levels, measuring impact to MSAs, industries, occupations, and businesses across the U.S.