Four-Week Moving Average of Continued Claims to Lowest Level Since 1973
- After spiking in mid-January, initial unemployment insurance claims fell for a second straight week in the week ending January 29, moving closer to their level at the end of 2021.
- Continued claims fell in the week ending January 22, with the four-week moving average down to its lowest level since 1973.
- The omicron variant weighed on the labor market in January, but the hit is quickly fading.
- PNC expects job losses of 400,000 when the BLS releases the January jobs report on Friday, with the unemployment rate up to 4.2%. But the job market should quickly recover in February.
Initial claims for unemployment insurance fell to 238,000 in the week ending January 29, down from 261,000 the previous week (revised slightly higher from 260,000).
After spiking briefly in mid-January, likely due to the omicron variant, initial UI claims are now falling. Claims rose from 200,000 in late December to 290,000 in the week ending January 15, their highest level since October 2021. But claims have now fallen for two straight weeks as the hit to the labor market from omicron appears to be fading.
The four-week moving average of claims, which smooths out some of the weekly volatility, rose by 8,000 in the week ending January 29, to 255,000. In late January the four-week moving average was continuing to capture some of the increase in claims earlier in the month; it should start to decline in the next couple of weeks.
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) fell by 44,000 in the week ending January 15, to 1.628 million; claims for the previous week were revised down by 3,000 to 1.672 million. The four-week moving average of continued claims fell to 1.620 million, down 31,000 from the previous week. This is the lowest level for the four-week moving average since 1973. The four-week moving average of continued claims has fallen every week but once since late May 2021 as unemployed workers leave the 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 recovered to their pre-pandemic levels.
The drag on the labor market from the omicron variant is quickly dissipating. Initial claims for unemployment insurance briefly spiked in mid-January but are most of the way back to their late 2021 levels of around 200,000. Continued claims are steadily falling, with the four-week moving average at its lowest level in almost five decades.
The ADP National Employment Report for January was disappointing, with private-sector employment down by more than 300,000 for the month. And PNC expects the government’s official monthly jobs report to show a decline in employment of 400,000 when the BLS releases the data Friday morning. PNC also expects the unemployment rate to temporarily tick up to 4.2% in January, from 3.9% in December.
But the big drop in initial claims over the past two weeks, and the ongoing decline in continued claims, indicate that the job growth should bounce back in February and the unemployment rate should decline. As the omicron variant recedes the biggest constraint on hiring in the spring of 2022 will be a worker shortage; the labor force is smaller by about 2 million compared to before the pandemic. Some of those people will come back to the labor force as the pandemic fades, but not all of them, and firms will need to adjust to a structurally tighter labor market. The tight labor market is a major reason why layoffs are so low; businesses are concerned that if they lay off workers, they will not be able to find replacements if demand picks back up.
Even with a decline in January, PNC expects job growth to average around 350,000 per month over the course of 2022, well above the pre-pandemic pace of hiring, but down from average monthly job growth of 540,000 in 2021. The unemployment rate should end this year at or below its pre-pandemic level of 3.5%. However, risks to the labor market are to the downside, including the ongoing pandemic and weak labor force growth.
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