• Initial claims for unemployment insurance rose in the week ending June 12, the first increase since April. The four-week moving average of initial claims continued its lengthy decline, however.
• Initial pandemic-related claims rose in the week ending June 12.
• The total number of unemployment insurance beneficiaries continued to decline through late May.
• Some states will be dropping extra UI benefits over the next month, which could encourage recipients to look for work.
• The U.S. labor market continues to steadily improve.

Initial claims for unemployment insurance rose by 37,000 in the week ending June 12, to 412,000. This was the first weekly increase in initial claims in seven weeks. The previous week’s initial claims of 375,000 (revised lower from 376,000) was the lowest level since before the pandemic came to the United States in early 2020.

The four-week moving average of initial claims, which smooths out some of the volatility, fell by 8,000 to 395,000 in the week ending June 12, the first time it has been below 400,000 since March 2020. The four-week moving average has fallen for 10 straight weeks, and in 18 of the last 19 weeks.

Although initial claims rose in the week ending June 12, they have been falling steadily since February as the labor market recovery has picked up. Initial claims skyrocketed to more than 6 million per week in April 2020 as the pandemic hit the U.S. economy, then dropped through the late spring and summer of last year as businesses gradually reopened. But claims then stabilized at around 800,000 per week from November 2020 to February 2021 as the pandemic re-intensified, states re-imposed restrictions on economic activity, and the labor market recovery stalled. But since then, with stimulus supporting consumer spending and vaccinations leading to a big drop in coronavirus cases, initial claims have fallen by around one-half as layoffs have declined. But initial claims are still about double the pre-pandemic level of 200,000 per week.

The number of initial claims under the Pandemic Unemployment Assistance program jumped to 118,000 in the week ending June 12, up by 48,000 from the previous week. It is unclear what was behind this big jump in PUA claims; much of it was in Maryland (+18,000) and Kentucky (+9,000). But before this, pandemic-related layoffs had been steadily falling as coronaviruses cases decline and normal economic activity resumes.

The total number of people receiving unemployment insurance benefits across all programs, including pandemic-related programs, fell to 14.829 million in the week ending May 29, down from 15.389 million the prior week (not seasonally adjusted). The number of people receiving some form of unemployment has been steadily falling over the past few months and is down from a peak of more than 32 million in June 2020. However, the total number of beneficiaries is still far above the 2 million receiving some form of benefit before the pandemic.

The number of people receiving unemployment insurance benefits under regular state programs fell to 3.518 million in the week ending June 5, up slightly from 3.519 million the previous week. The four-week moving average fell by 55,000 to 3.604 million. This is the lowest level for continued claims the beginning of the pandemic in March 2020. This is down from a peak of 23 million in May 2020, but well above the pre-pandemic level of 1.7 million.

Despite the increase in initial claims in the week ending June 12, the weekly data continue to indicate an improving labor market. Initial claims have been falling steadily for the past four months, notwithstanding the latest increase and total claims are also falling. Claims are declining both because layoffs have slowed, and because unemployed workers are quickly finding new jobs with many employers looking to hire as demand strengthens. Job openings surged to a record-high in April, and many businesses are having difficulty finding new workers.

There is some concern that extra unemployment insurance benefits of $300 per week are leading some potential workers to turn down low-paying opportunities, leading to labor shortages in some industries and weighing on job growth. Some states have started to drop the extra benefits and over the next month about one-half of states will have stopped them, citing the improved job market; we will soon find out if the extra benefits are discouraging reemployment. Other reasons that the unemployed might not be taking available jobs include concern over contracting COVID and the need to care for children who are schooling at home because of the pandemic.

Job growth in May was good but not great at 559,000. This was an improvement from April, but well below the pace in mid-2020 as the economy was reopening. PNC expects job growth of around 600,000 per month through the rest of 2021, with employment returning to its pre-recession level in the second quarter of 2022. The unemployment rate, which was 5.8% in May, will steadily decline through the rest of 2021, ending the year at around 5.0%.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.