; long-term unemployment is rising
Initial claims for unemployment insurance fell 4 percent to 732,000 before seasonal adjustment in the week ended October 24. After seasonal adjustment, claims fell 5 percent to 751,000. After hovering around 800,000 in late August and September, initial claims have been below 800,000 per week in three of the last four weeks. Initial claims for Pandemic Unemployment Assistance rose a smaller 4 percent to 360,000 in the week ended October 24. Initial claims data are improving but are still very elevated; they were running below 300,000 per week in early 2020 before the crisis struck.
The U.S. economy is on net recovering jobs in October, but layoffs continue to be very high. Weak conditions in hard-hit sectors and regions are forcing businesses to reduce headcount. And some businesses that delayed layoff decisions earlier in the downturn are now making them.
Continuing claims fell 8 percent the week ended October 17 to 7.422 million before seasonal adjustment, reported as 7.756 million after seasonal adjustment. Like initial claims, continuing claims for unemployment insurance have trended lower in recent weeks. Some of the decline in continuing claims is due to claimants losing eligibility for traditional state benefits, which in most states are limited to 26 weeks. The increase in Pandemic Emergency Unemployment Compensation claims (PEUC), up 12 percent in the week of October 10 to 3.683 million, demonstrates that large numbers of short-term unemployed are becoming long-term unemployed or underemployed.
The number of claimants for all unemployment programs fell 2 percent on the week in the week ended October 10, and the prior week’s level was revised down slightly. Total claimants are falling slower than claimants for state programs, again reflecting the shift of claims from short-term to long-term programs. Claimants for all programs were down 416,000 on the week and 3.856 million on the month.
The claims data suggest the labor market continued to improve in October, but unemployment remains highly elevated. Increasing numbers of unemployed workers are shifting to PEUC, a sign long-term unemployment is rising. Longer-term unemployed workers have a harder time finding jobs, so this increase is further evidence that unemployment will stay elevated in 2021 and 2022.
The pace of improvement in claims data has been better in October than September. Some of this is because California is now reporting data that had been delayed by wildfires, but the underlying pace of growth in the U.S. economy seems to have been a bit stronger this month than last; the Federal Reserve Bank of New York’s Weekly Economic Index, a high-frequency proxy for real GDP, also improved more in October than in September. At the same time, indicators of the pandemic-confirmed cases, hospitalizations, and deaths-have worsened in recent weeks. If people become more cautious about leaving the house, or U.S. governments impose restrictions on activities the way European and Canadian governments have in recent weeks, the U.S. recovery could weaken in the winter months.
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