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PNC Senior Economist Abbey Omodunbi: Initial Claims Down 24,000 From Previous Week;

pncfsg CroppedLabor Market Recovery Remains on Track

  • Initial claims for unemployment insurance fell to 400,000 in the week ending July 24, down from an upwardly revised 424,000 the previous week.
  • The total number of beneficiaries rose to 13.156 million in the week ending July 10, up from 12.574 million the prior week.
  • Labor shortage will ease, and the labor market will continue to improve through the rest of 2021.

Initial claims for unemployment insurance fell to 400,000 in the week ending July 24, down from an upwardly revised 424,000 the previous week. The four-week moving average of claims, which smooths some of the week-to-week volatility, rose to 394,500 in the week ending July 24, up 8,000 from the previous week.

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, then stabilized at between 700,000 and 900,000 between August and March. But since the spring, claims have gradually but steadily fallen to around 400,000 per week. This is still about double their pre-pandemic level, however.

Initial claims fell in the Pandemic Unemployment Assistance (PUA) program in the week ending July 24, to 95,166, from 109,868 the previous week (not seasonally adjusted). A total of 13.156 million people received some form of unemployment insurance benefit in the week ending July 10, up by over 500,000 from 12.574 million in the previous week (not seasonally adjusted). A 217,148 spike in Pandemic Emergency Unemployment Compensation (PEUC) continued claims in California accounted for about fifty percent of the increase in total beneficiaries. The PUA program covers individuals who are not eligible for other UI benefits, including self-employed workers, gig workers, and independent contractors. The PEUC program provides eligible individuals with additional weeks of unemployment benefits when they have exhausted their regular UI claims.

Continued claims under regular state programs was 3.269 million in the week ending July 17, up 7,000 from the previous week. With most people receiving benefits via pandemic-related programs, regular state continued claims have become less important as a labor market indicator. The pandemic-related programs should be considered in tandem with the regular state benefits to get a fuller picture of the labor market.

The U.S. labor market recovery is gaining steam, but unemployment remains very high. Total employment in June was 145.8 million, up 15.6 million from April 2020, but still down 6.8 million (more than 4 percent) from the pre-pandemic peak in February 2020. However, many employers are complaining about worker shortages. The National Federation of Independent Business (NFIB) survey in June showed 46 percent of all small business owners reported having job openings they could not fill.

Despite labor supply challenges, PNC Economics expects average monthly job growth of around 600,000 in the second half of 2021. The labor supply issues will fade as vaccination rates increase and the pandemic fades. Additionally, the reopening of schools in the fall will have a positive impact on the labor market, allowing many parents to return to the labor force. The unemployment rate will decline to around 5% by the end of the year and around 4% by the end of next year. Risks to the outlook are weighted to the downside. The continued spread of the Delta variant could lead to additional government restrictions on economic activity.

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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