Initial claims for unemployment insurance fell to 684,000 in the week ended March 20, down 97,000 from 781,000 in the week ended March 13 (revised up from 770,000 in the prior release). Initial claims for Pandemic Unemployment Assistance fell to 242,000 in the week ended March 20 from 284,000 a week earlier.

Continued claims under standard state programs fell to 3.870 million in the week ended March 13 from 4.134 million in the week ended March 6 (revised up from 4.124 million in the prior release). More comprehensive data is released at a lag-weeks claimed under all UI programs, including the emergency PUA and PEUC programs, rose to 18.953 million the week ended March 6 from 18.219 million a week earlier.

Unemployment is falling in mid-March but remains very elevated. Weekly initial claims surged to nearly 7 million in the spring of 2020 as large swathes of the economy shut down, then gradually fell to 700,000 in late 2020. Initial claims hovered between 700,000 and 900,000 between November 2020 and early March as the winter coronavirus surge weighed on the recovery.

The week of March 20 saw the lowest level of initial claims since the crisis struck, so layoffs are slowing. Even so they’re still much higher than in a healthy economy-weekly initial claims averaged around 230,000 in the mature stage of the last expansion, between 2017 and 2019, when the unemployment rate averaged 4%. Payroll employment was still 9.5 million below the pre-crisis level in February, so there is still a ways to go until the labor market regains all the jobs lost over the past year.

Job growth will accelerate substantially in coming months as consumers spend stimulus dollars and unemployment benefits, and the vaccination drive allows the economy to reopen. Falling coronavirus cases are especially good news for high-contact industries like restaurants, hotels, and other leisure and hospitality businesses. As the pandemic comes under control, these businesses will rapidly regain revenue and rehire workers.

The biggest near-term downside risk comes from faster-spreading strains of coronavirus. If a new strain makes vaccines less effective, it could substantially delay the recovery. The biggest upside risk is that vaccinations accelerate and tame the pandemic globally, allowing foreign markets to revive and easing the supply chain bottlenecks that are holding back the recovery.

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