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PNC Chief Economist Gus Faucher: Initial UI Claims Fall for Sixth Straight Week,

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Continue Their March to Normalcy

  • Initial unemployment insurance claims fell for a sixth straight week in the week ending November 6, to their lowest level since the beginning of the pandemic.
  • The number of continued state unemployment insurance claims rose in the week ending October 30, although the four-week moving average fell.
  • Both initial and continued UI claims are returning to their pre-pandemic levels.
  • The labor market is recovering from the Viral Recession but the labor force is much smaller than it was before the pandemic, restricting hiring.

Initial claims for unemployment insurance fell for a sixth straight week in the week ending November 6, to 267,000. This was the lowest level of initial claims since March 2020, as the pandemic was getting underway. Claims are within spitting distance of their level of slightly above 200,000 from before the pandemic. Initial claims in the week ending October 30 were 271,000, revised slightly higher from 269,000. The four-week moving average of claims, which smooths out some of the volatility, fell by 7,000 in the week ending November 6 to 278,000. This is also the lowest level for the four-week moving average since March 2020, and the four-week moving average has fallen for five straight weeks. Steadily falling initial claims indicate that the labor market continues to rapidly recover from the Viral Recession, and that job growth remains good in late 2021.

Initial claims have been dropping over the past few months and are rapidly approaching their pre-pandemic level. Initial claims jumped in early 2020 to more than 6 million in April of last year 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. This spring claims fell gradually but steadily before stabilizing at around 400,000 per week, and then started to decline again in August.

There were 2.160 million people receiving regular state benefits in the week ending October 30, up from down from 2.101 million the previous week (revised lower by 4,000). The four-week moving average of state continued claims was 2.245 million in the week ending October 30, down from 2.356 million the previous week. This was the lowest level for the four-week moving average of state continued claims since March 2020, before the pandemic wreaked havoc on the labor market.

State continued claims peaked at more than 23 million in May 2020 and are gradually moving closer to their pre-recession level of around 1.7 million. With most people receiving benefits via pandemic-related programs until recently, continued claims under regular state programs had been less important as a labor market indicator. But with those pandemic-related programs expiring in September, regular state continued claims are now more relevant.

Both initial and state continued claims continue their months-long declines toward their pre-pandemic levels as the labor market heals. Demand for labor is very strong and workers are in short supply, so layoffs are very low right now. Those workers who do find themselves unemployed are quickly able to find new jobs. The biggest problem for the labor market in late 2021 is too few workers; the labor force is smaller by about 3 million compared to before the pandemic. The big open question is what is happening to the millions of people who lost their unemployment insurance benefits in September or saw their benefits drop. The expectation is that these people will come back into the job market in the near term, relieving some of the labor shortages and allowing for stronger job growth. But labor force participation barely budged in September and October after the expiration of these benefits. The recovery in the labor force may be more gradual, which could constrain near-term hiring.

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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