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PNC Chief Economist Gus Faucher: Initial UI Claims Continue Return to Pre-Omicron Level;

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 Labor Market in Great Shape

  • Initial claims for unemployment insurance fell for the third straight week in the week ending February 5 to 239,000. The four-week moving average also fell.
  • Continued claims were unchanged in the week ending January 29, with a small increase in the four-week moving average. Continued claims are near their lowest level in decades.
  • The labor market is in excellent shape in early 2022, even with the omicron variant.

Initial claims for unemployment insurance fell to 223,000 in the week ending February 5, down from 239,000 the previous week (revised up from 238,000). Initial UI claims increased from around 200,000 per week in late 2021 to a peak of 290,000 in the week ending January 15 as the omicron variant hit the labor market. But they have now fallen for three straight weeks as the omicron wave has started to fade, and the labor market remains very sturdy in early 2022.

The four-week moving average of claims, which smooths out some of the volatility, fell by 2,000 in the week ending February 5, to 253,000. The four-week moving average had risen in January with omicron.

Initial claims jumped to more than 6 million in April of 2020 as the pandemic came to the U.S. They then fell quickly to around 900,000 per week by early August 2020, then stabilized at between 700,000 and 900,000 between August 2020 and March 2021. Claims fell gradually but steadily in the spring of 2021 before stabilizing at around 400,000 per week and then started to decline again in August 2021, with an especially large decline in the second half of November. At the end of 2021, they settled in at around 200,000 per week.

The total number of people receiving benefits under regular state unemployment insurance programs (continued claims) was unchanged in the week ending January 29 at 1.621 million; claims for the previous week were revised slightly lower. The four-week moving average of continued claims fell to 1.6345 million, an increase of 16,500 from the previous week. This was just the second increase in the four-week moving average since May 2021 and was due to a brief increase in claims in mid-January with omicron. Continued claims have been falling as unemployed workers leave the program’s rolls, either because their benefits have expired or because they have quickly found a new job. After peaking at more than 23 million in May 2020, state continued claims have now moved to their lowest levels since the mid-1970s.

The labor market is doing extremely well in early 2022. The January jobs report was very good, with an increase of 467,000 jobs over the month, despite the omicron variant. But more importantly, there were big upward revisions to job growth at the end of 2021 in the January report. The three-month moving average of growth through January 2022 was an excellent 541,000, much better than prior estimates had indicated. The unemployment rate rose slightly in January, to 4.0%, but should return to its pre-pandemic level of 3.5% in the second half of this year.

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.

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