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PNC Chief Economist Gus Faucher: Initial UI Claims Rose in Latest Week Due to Hurricane Ida;

pncfsg CroppedPandemic-Related Initial Claims Plunged as Program Ended

  • Initial claims for unemployment insurance rose modestly in the week ending September 11, in part due to Hurricane Ida, while the four-week moving average fell. Initial claims have been falling in late summer as the labor market improves.
  • Initial claims plunged under the Pandemic Unemployment Assistance program, which ended on September 5.
  • The total number of people receiving unemployment insurance benefits fell somewhat in the week ending August 28. Unemployment remains a significant problem.
  • Millions of people have lost access to unemployment insurance benefits in early September, and millions of others have seen their benefits decline, with the end of pandemic-related UI programs.

Initial claims for unemployment insurance under regular state programs rose to 332,000 in the week ending September 11. This was up from 312,000 in the previous week (revised higher from 310,000), the lowest level of claims since March 2020, as the pandemic was just getting underway. Despite the increase in the week ending September 11 the four-week moving average, which smooths out some of the volatility in claims, fell to 335,750, down from 342,000 the previous week. This is the lowest four-week moving average since the beginning of the pandemic.

Hurricane Ida pushed up claims in the week ending September 11. The storm prevented some of the unemployed from filing for UI, and then layoffs increased in the wake of the hurricane. Initial claims have risen sharply in Louisiana in the beginning of September.

Despite the latest increase, initial claims for unemployment insurance have moved lower in the late summer as the labor market continues to improve and are now within spitting distance of their pre-pandemic level. Initial claims jumped from 200,000 per week 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.

Initial claims under the Pandemic Unemployment Assistance program plunged in the week ending September 11 to 28,000, from 94,000 the previous week. This is not surprising given that the program, which expanded eligibility to unemployment insurance benefits in the wake of the pandemic, ended on September 5. Before the expiration, PUA claims were running at around 100,000 per week over the summer.

The total number of people receiving unemployment insurance benefits in the week ending August 28 rose to 12.107 million, up from 11.928 million the previous week (not seasonally adjusted). Most of those are receiving benefits under special pandemic-related programs. Total beneficiaries have been around 12 million since mid-July. This is many times the approximately 2 million weekly continued claims in early 2020, before the pandemic. Total continued claims peaked at 33.2 million in June 2020.

There were 2.665 million people receiving UI benefits under regular state programs in the week ending September 4, down from 2.825 million. This is the lowest level for continued claims since March 2020, before the pandemic, and down from a peak of more than 23 million in May 2020. But continued claims are well above their pre-recession level of around 1.7 million, and the pace of improvement has slowed in 2021. With most people receiving benefits via pandemic-related programs regular state continued claims were less important as a labor market indicator, although they will become relevant again with the end of pandemic-related programs.

The increase in initial claims in the week ending September 11 is likely due in part to the impact of Hurricane Ida, and that will likely fade from the data over the next couple of weeks. Despite the most recent increase initial claims for unemployment insurance have moved lower in recent weeks as the labor market continues to improve, even as the delta variant remains a concern. Job growth was a disappointing 235,000 in August, far below the average gains of more than 1 million in June and July. The unemployment rate fell to 5.2% in August from 5.4% in July and is down from a peak of 14.8% in April 2020.

Although the job market is improving, the U.S. labor market still has a long way to go before it is back to normal. Layoffs remain above their pre-pandemic level, and many millions of people who lost their jobs during the pandemic remain unemployed. Job growth will bounce back from the disappointing August to around 600,000 per month through the rest of this year, with employment surpassing its pre-recession peak in the spring of 2022. The unemployment rate, which fell from 5.9% in June to 5.4% in July, will end this year below 5%, and next year at around 4%.

The biggest question mark is what happens to the labor market, and consumer spending, given that pandemic-related unemployment insurance programs expired on September 6. These programs made benefits available for a longer period of time than usual; increased eligibility by providing benefits to the self-employed, gig workers, and independent contractors; and increased the level of benefits. As a result, millions of people have lost their benefits this week, and those still receiving benefits have experienced a decline in UI income. Retail sales growth was surprisingly strong in August, but a big drop in UI income will be a drag in September.

Many states have been ending their pandemic-related UI programs over the past few months, with little apparent impact on job-seeking behavior or consumer spending. But the national expiration could have broader effects. One thing it may do is spur more job-seeking activity, which should allow for continued strong job growth through the rest of this year and into 2022. The number of job openings jumped in July to a record high as employers continue to search for workers.

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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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