as Coronavirus Cases Rise
Initial claims for unemployment insurance jumped by 32%, before seasonal adjustment, to 948,000 in the week ending December 5. This was by far the biggest jump in claims since the initial surge in layoffs in the spring. After seasonal adjustment claims rose by 19% to 853,000.
Initial claims for unemployment insurance have moved higher in four of the past six weeks, with the increase in early December especially large. Layoffs appear to be increasing as coronavirus cases set record highs, consumers stay home, and states and localities implement restrictions on economic activity. Still, initial claims remain far below the peak of more than 6 million in the spring.
The number of people receiving unemployment under regular state programs (continuing claims) rose by 10.2% to 5.781 million in the week ending November 28, before seasonal adjustment. This was the first increase in continuing claims since late August; the number had been falling because of both beneficiaries leaving unemployment for work, and because beneficiaries had been exhausting their benefits under regular state programs and moving into pandemic-related programs.
Continuing claims peaked at 23 million (not seasonally adjusted) in May, but then fell steadily into November.
The number of unemployment insurance beneficiaries, across all programs including pandemic-related programs, fell by 10% in the week ending November 21, to 19.043 million. At the same point last year the number of beneficiaries was 1.535 million.
Unemployment insurance claims can be volatile, especially around the holidays. But the recent increases in both initial and continuing claims suggest that record coronavirus cases are starting to weigh on the labor market. It is too early to say if employment is outright falling, or if it is only that the pace of improvement in the labor market has slowed dramatically. But it is fair to say that the labor market is in trouble in late 2020 because of the continued spread of the pandemic. With states starting to reimpose restrictions on economic activity, the job market is set to further soften into early 2021. Widespread rollout of a vaccine should allow for an improvement in the job market later next year.
The worsening in the claims data demonstrates the need for additional fiscal stimulus. With almost 20 million people receiving some form of UI, and about 12 million beneficiaries set to lose pandemic-related benefits at the end of the year when they are set to expire, consumer spending could take a big hit in early 2021 unless Congress renews those programs.
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