– July 23, 2020

Labor-market conditions remain in flux as some workers are getting called back to work while others are still being cut. The two most recent jobs reports (covering May and June) showed big gains in employment and big drops in unemployment, yet new claims for unemployment benefits rose for the first time in several months and continue to run at historically high levels. Further complicating the outlook is the surge in new cases and deaths in many states attributed to COVID-19. The resurgence has led some states to slow the process of reopening and, in some cases, reverse course.

Initial claims for unemployment insurance totaled 1.42 million for the week ending July 18, a rise of 109,000 from the previous week’s 1.31 million. The results continue a run of eighteen consecutive weeks of historically massive claims following the implementation of business and consumer lockdowns intended to fight the COVID-19 pandemic (see chart). However, the rise in the latest week brings an end to the fifteen-week run of slowing claims after registering 6.87 million for the week ending March 28. There continues to be suspicions about the accuracy of the claims numbers as government processors attempt to catch up on backlogs of filings.

The number of ongoing claims continued to fall (though these data are a week behind the data on new claims). Continuing claims totaled 16.2 million for the week ending July 11, down 1.1 million from 17.3 million for the week ending July 4. The insured unemployment rate was 11.1 percent, down from 11.8 percent in the prior week.

The national Employment Situation report for June was released on Thursday, July 2 and showed a gain of 4.8 million jobs following a 2.7 million rise in May, as reported in the establishment survey portion of the report. The total number of officially unemployed fell to 17.8 million in June, a drop of 3.2 million from the 21.0 million in May (and from 23.1 million in April – see chart). The number of officially unemployed in February before lockdowns were implemented was just 5.8 million, as reported in the household survey portion of the report.

The unemployment rate as measured in the employment report fell to 11.1 percent in June (though the Bureau of Labor Statistics noted that improper responses likely underreported the rate and it is likely about 1 point higher, near 12 percent) versus 13.3 percent in May (and nearly 20 percent if corrections were made to the April number). The previous cycle peak in the unemployment rate was 10 percent in October 2009 while the highest unemployment rate since 1950 came in November 1982 at 10.7 percent. Though data collection was much less reliable, the unemployment rate following the Great Depression was estimated to have peaked at about 25 percent in 1933.

The mixed results for some labor market data suggest the economic recovery may be hitting some difficulties. With new COVID-19 cases surging around much of the country, the emerging recovery is at risk from consumer retrenchment and widespread reinstated lockdown policies. The next Employment Situation report covering the month of July is due out on Friday, August 7.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.

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