Initial Claims Rise to a Seven-Week High

NOTE: The state of California has announced a two week pause in its processing of initial claims for unemployment insurance benefits. The state will use this time to reduce its claims processing backlog and implement fraud prevention technology. Recognizing that the pause will likely result in significant week-to-week swings in initial claims for California and the nation unrelated to any changes in economic conditions, California’s initial claims published in the UI Claims News Release will reflect the level reported during the last week prior to the pause. Upon completion of the pause and the post-pause processing, the state will submit revised reports to reflect claims in the week during which they were filed.

Initial claims for regular state unemployment insurance totaled 898,000 for the week ending October 10, up 53,000 from the previous week’s revised tally of 845,000 (see first chart). Claims are now at a seven-week high, the highest level since August 22. The four-week average was 866,250, up 8,000 from the prior average and the first increase since July 25th. The latest week is the 30th week of historically massive claims. Prior to the lockdowns, initial claims were running around 230,000 (see first chart). The number of initial claims surged in the initial phase of government lockdowns, hitting almost 7 million for the week ending March 28. Initial claims declined fairly rapidly over the next 10 weeks but since early June, the declines have slowed significantly with claims showing increases in six of the past 13 weeks. Persistent initial claims at such a historically high level remain a very troubling sign for the labor market recovery and the economy.

The number of ongoing claims for state unemployment programs totaled 10.762 million for the week ending September 26, down 799,126 from the prior week (see second chart). For the same week in 2019, ongoing claims were 1.390 million. Continuing claims from state programs have trended lower since the peak in early March. Over the same period, continuing claims in all federal programs have trended higher, reaching 14.528 million for the week ending September 26.

The total number of people claiming benefits in all unemployment programs including all emergency programs was 25.290 million for the week ended September 26, down 215,270 from the prior week. While there has been improvement from the catastrophic results in March and April, the current level of weekly initial claims is still very high and continuing claims are still massive (see second chart).

Government-imposed restrictions intended to slow the spread of Covid-19 continue to wreak havoc on the economy and the labor market. The longer consumers remain restricted and businesses remain closed or limited, the more uncertain a labor market recovery becomes and the higher the probability of a slow and drawn-out economic recovery.