No Indication Yet of Decisive Improvement in Labor Market, But It Is Coming

• Initial claims for unemployment insurance fell slightly in the week ending March 6 but remained well above their pre-pandemic level. Initial claims have been flat since November.
• There were 20 million people receiving some form of unemployment benefit at the end of February. Unemployment remains a huge problem for the U.S. economy.
• With the passage of a huge $1.9 trillion stimulus bill, job growth will pick up sharply in the months ahead and unemployment will quickly decline.

Initial claims for unemployment fell by 42,000 in the week ending March 6, to 712,000. Claims for the previous week were revised slightly higher, to 754,000 from 745,000. The four-week moving average of claims, which smooths out some of the volatility, fell by 34,000 to 759,000 in the week ending March 6.

A year ago, as the pandemic was first coming to the United States, about 200,000 per week were filing for unemployment insurance benefits. That soared to almost 7 million in late March 2020 as business shuttered. Initial claims then fell steadily through the early fall as businesses reopened. But since October claims have settled in between 700,000 to 900,000 per week, with no indication of returning to their pre-recession trend. Layoffs related to the pandemic remain extremely elevated.

In addition, 478,000 people filed for unemployment insurance under the Pandemic Unemployment Assistance program in the week ending March 6 (not seasonally adjusted). This was up by 42,000 from the previous week.

There were a total of 20.116 million people receiving unemployment insurance benefits, including from pandemic-related programs, in the week ending February 20 (not seasonally adjusted). This was up by almost 2.1 million from the previous week. Unemployment remains a huge problem for the U.S. economy. Before the pandemic about 2 million people were receiving weekly UI benefits, but that number rose to more than 32 million in July. It has fallen steadily since then, but tens of millions of Americans are receiving UI benefits a year into the pandemic.

A total of 4.144 million people were receiving unemployment benefits under regular state programs in the week ending February 27. This was down 193,000 from the previous week. After peaking at almost 25 million in early May, the number of state program recipients has fallen steadily. Some of this improvement has come from UI beneficiaries returning to work, but much of it has come from recipients using up their eligibility and moving to special pandemic programs. Before the pandemic about 1.7 million people were receiving regular state benefits per week.

Unemployment remains a huge problem for the U.S. economy one year into the pandemic. Around 20 million people are receiving some form of unemployment insurance, and that number has not improved since November. Layoffs also remain extremely elevated After an initial surge in hiring over the summer as businesses reopened, job growth has weakened dramatically since the fall. Job gains averaged 2 million per month between May and October; that has slowed to an average of just 125,000 over the last four months.

The good news is that job growth will accelerate in the months ahead, to around 600,000 per month by the summer. Job growth in February was much better than expected at 379,000, thanks to falling coronavirus caseloads and stimulus payments in early 2021 that boosted household spending. The $1.9 trillion stimulus package that just passed Congress, along with previously-enacted stimulus, accelerating vaccine distribution, better weather, very low interest rates, and falling coronavirus cases, will lead to a surge in economic activity through the rest of 2021. Employment is expected to return to its pre-recession level in the second half of 2022. The unemployment rate, which jumped from 3.5% in February 2020 to 15.8% in April, fell to 6.2% as of February 2021. It will continue to decline over the next few years, ending 2021 at around 5% and 2022 at around 4%. 

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