The Department of Labor reported that 860,000 initial claims for unemployment insurance were filed for the week ending September 12, signaling a prolonged recovery lies ahead of us. The latest total is a decline of just 33,000 from the prior week’s adjusted total of 893,000 initial claims. For perspective, there were 201,000 initial claims for the week ending February 1, 2020. If initial claims continue to decline at a pace of approximately 30,000 per week, it will take about 22 months to return to the initial claims level from earlier this year.
Continued claims for the week ending September 5 were 12.6 million, down 916,000 from the previous week’s total. A drop in claims is welcome news, but as we arrive at the midpoint of recovering all jobs lost early in the pandemic, we should expect for the second half to be slower and to pose unique challenges to job seekers and businesses alike.
LaborIQ® by ThinkWhy estimates the combined total of initial and continued claims is approximately 13.1 million for the week ending September 12. This is less than half the peak of 27.6 million in May, showing the extent of recent gains, but it also highlights just how far economic activity dropped. Using Unemployment Claims, LaborIQ by ThinkWhy estimates the unemployment rate to be 14.7%, despite months of improvements in the labor market. This is a direct result of the economic impact of COVID-19.
The Commerce Department reported seasonally adjusted retail sales increased just 0.6% in August. The figure was down from 0.9% in July, but very similar to the 0.5% rate from a year ago. Sales growth was at a normal pace in a time when extraordinary results are needed for a full rebound. Retail sales had increased 18.3% in May and 8.4% in June before moderating in July and August.
The federal government’s decision to cut the unemployment benefit amount is likely taking a toll on consumer spending. Based on a survey of 62 economists conducted by The Wall Street Journal from September 4-8, nearly half of the economists expected the cut in benefits to impact consumer spending starting in September. That means the moderation in spending that started in mid-summer could just be the start of what is to come in the fall as personal budgets are squeezed. If Congress fails to provide another round of fiscal stimulus to the economy, the economy’s growth could be slowed.
If the month of September adds jobs at a pace close to August, we should be slightly past the halfway point to the pre-pandemic employment level from February. Significant progress has been made recapturing these jobs, but challenges persist, and the pace of the rebound will likely slow until we get a vaccine. Weekly unemployment claims indicate the pandemic continues to inhibit the economy’s rebound as millions remain out of work. LaborIQ by ThinkWhy expects initial jobless claims for September to hover around 4.0 million.
With the 2020 presidential election approaching, there is more pressure on Congress to take action on another round of fiscal stimulus. As of today, there is talk in the press that Congress may be resuming talks about a second stimulus round. With the road ahead remaining uncertain due to the pandemic and election, initial unemployment insurance claims have been hovering at just below 900,000 per week, reflecting a slowly recovering economy. Hopefully, there will be a vaccine for COVID-19 and a second round of fiscal stimulus soon to put the economy on a faster path to recovery.
LaborIQ by ThinkWhy continuously monitors and forecasts labor data at all levels, measuring impact to cities, industries, occupations and business across the U.S.