Labor Market on the Mend as Lockdowns Ease
Initial claims for unemployment insurance totaled 1.54 million for the week ending June 6, marking the twelfth consecutive week of massive layoffs (see chart). However, claims have slowed for the tenth straight week after registering 6.87 million for the week ending March 28.
The current 12-week total of 44.2 million initial claims is 5 times the total 8.7 million job losses that occurred over 25 months versus during the Great Recession (see chart). The current total is also 2.9 times the 15.4 million peak number of unemployed people for the Great Recession, as measured in the household survey portion of the monthly Employment Situation report (see chart).
The national Employment Situation report for May was released on Friday, June 5 and showed a drop of 2.5 million in nonfarm jobs following a 20.7 million loss in April, as reported in the establishment survey portion of the report. Total unemployed in May was 21.0 million, down from 23.1 million in April (see chart), as reported in the household survey portion of the report.
The unemployment rate fell to 13.3 percent (though the Bureau of Labor Statistics noted that improper responses likely underreported the rate and is likely about 3 points higher, near 16 percent) versus 14.7 percent in April (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.
Massive layoffs as a result of government shutdown policies have occurred over the last 12 weeks, crushing the labor market, consumer confidence, and retail spending, sending the economy into recession. Despite massive government spending and extraordinary monetary policy efforts, the outbreak of COVID-19 and ensuing policy responses brought the longest economic expansion in U.S. history screeching to a sudden end. However, as government restrictions are eased, there are early signs of healing starting to emerge, suggesting the economy may be bottoming and setting the stage for growth later in the year.
Robert 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.
