US jobless claims: 1.25M?
Total during economic crisis caused by pandemic could go above 51 million
A broad measure of layoffs in the U.S. likely declined again but remained elevated last week, pushing the total during the coronavirus-induced economic crisis over the past four months above a staggering 51 million.
Economists will be closely watching the latest figures, due out Thursday, to see whether the downward trend in job cuts has been slowed or reversed by the many states that are pausing or rolling back their reopening plans.
Economists surveyed by Bloomberg estimate the Labor Department will report Thursday that 1.25 million Americans filed initial applications for unemployment benefits – a rough measure of layoffs – for the week ending July 11. That would mark a drop from 1.3 million the prior week and the 15th straight weekly decline after firsttime claims peaked at 6.9 million at the end of March.
Still, the totals during the coronavirus crisis are exponentially higher than the previous all-time high of 695,000 claims during a deep recession in October 1982. Ian Shepherdson, chief economist of Pantheon Macroeconomics, expects the weekly tally to dip below a million by early August.
Yet that forecast is threatened by a spike in coronavirus cases across much of the country, particularly the South and West, and decisions by more than 20 states to pause or reverse the reopening of restaurants, bars, gyms, movie theaters and other outlets. That could spark a new wave of layoffs, especially in hard-hit states like Texas, Florida, Arizona and California, and possibly even push the claims totals higher.
Another factor that may trigger job cuts is that many businesses are exhausting the forgivable federal loans they received as long as they retained or rehired staffers, says Rubeela Farooqi, chief U.S. economist of High Frequency Economics. Some that are struggling could let workers go.
“Renewed increases in layoffs will slow the pace of recovery, especially if temporary job losses become permanent,” Farooqi wrote in a note to clients.
Meanwhile, continuing jobless claims, which represent all Americans still receiving benefits with a one-week lag, are expected to total 17.5 million in Thursday’s report, down from 18.1 million the prior week. That number also has been trending down and is becoming more significant because it reflects all those still unemployed and accounts for people who have returned to work.
Economists are puzzling over why both initial and continuing claims have remained so high even as the economy added a net 7.5 million jobs – including new hires and layoffs – in May and June after shedding 22 million the prior two months. One answer is that even though layoffs have continued, the figure has been far outpaced by the number of unemployed Americans who have been rehired as the economy reopens, Barclays wrote in a note to clients.
A separate Labor report showed that layoffs fell sharply in May, returning close to pre-pandemic levels. The disparity between that and the claims figures may partly reflect large backlogs of claims as states struggled to cope with an unprecedented flood that swamped their phone and computer systems, Barclays says.
Also, the claims totals may reflect more than just layoffs. The federal government has expanded eligibility criteria for unemployment insurance during the crisis, allowing workers who have been furloughed or are experiencing reduced hours to receive benefits, says Gregory Daco, chief U.S. economist of Oxford Economics.