Initial claims for unemployment insurance rose by 109,000 in the week ending July 18, to 1.416 million. This was the first increase in initial claims in sixteen weeks, since the end of March. Initial claims for the week ending July 11 were revised slightly higher, to 1.307 million from 1.300 million.
After peaking at almost 7 million in late March, initial claims fell steadily throughout April, May, and June. However, initial claims have plateaued in July at around 1.3 to 1.4 million, well above the pace of around 200,000 in early 2020, before the pandemic.
Continuing claims for unemployment insurance fell by 1.107 million in the week ending July 11, to 16.197 million. Continuing claims peaked at almost 25 million in mid-May, and have gradually fallen since then. However, continuing claims continue to run far above their pre-recession level of around 2 million.
Including special pandemic unemployment insurance benefits, almost 32 million people received some form of unemployment benefit in the week ending July 11.
The increase in claims in the week ending July 18 is an ominous indication that the improvement in the labor market, which started in May, may be coming to a halt. Claims can be volatile, and the one-week increase may only be a blip. But the pace of decline in initial claims has slowed dramatically over the past couple of months, and continuing claims remain extremely elevated. In addition, the increase in initial claims coincides with rising coronavirus cases in many parts of the country and new measures in many states to contain the spread of the virus. There were big jumps in initial claims in Florida, Georgia, and California the week ending July 11; all of those states have been very hard hit by new coronavirus cases in recent weeks. In addition, businesses that have remained open continue to lay off workers to adjust to a new, lower level of demand.
Extra unemployment insurance benefits of $600 per week are set to expire at the end of July. Congress is looking at extending these benefits, and there are concerns that the higher benefits could be leading some of the unemployed to put off returning to work. But the loss of extra income if the benefits are not renewed could lead to a drop in consumer spending in August.
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