PNC: Initial unemployment insurance claims remain elevated as pandemic continues to rage

Initial claims for unemployment insurance, before seasonal adjustment, fell 2% in the week ending December 12 to 935,000. After seasonal adjustment there was a 3% increase in claims to 885,000.

The four-week average of initial claims, after seasonal adjustment, has increased from around 750,000 in mid-November to above 810,000 in the week ending December 12. Claims can be volatile around the holidays, but the recent increase has persisted for a few weeks and appears to be due to problems in the job market, not just noise. At the beginning of 2020, before the pandemic, initial claims were around 200,000 per week.

Layoffs are rising in the United States at the end of 2020. After falling from May to September, and then stabilizing in October and November, initial claims have moved higher in December. In response to record-high cases of the coronavirus, consumers are staying home and governments are re-imposing restrictions on economic activity, leading firms to cut back on labor.

Continuing claims under regular state unemployment insurance programs fell 5% percent in the week ending December 5 to 5.493 million. Continuing claims are falling in part because workers are moving from unemployment to employment, but also because they are using up their eligibility and moving into special pandemic UI programs. After seasonal adjustment continuing claims fell 5% to 5.508 million. Continuing claims were around 2 million per week in early 2020.

Under all unemployment insurance programs, including pandemic-related ones, there were 20.647 million people receiving some form of benefits in the week ending November 28, up 8% from the previous week. These numbers are not seasonally adjusted. At the same point in 2019 there were 1.782 million people receiving some form of UI benefit.

Unemployment remains a serious problem in the U.S., and the problem is getting worse at the end of the year as coronavirus caseloads regularly hit new record highs. Initial and continuing claims are far lower than their peaks in the spring when the pandemic first hit, but remain many times higher than they were at the beginning of 2020. The job market is set to further weaken into the new year as states and municipalities impose additional restrictions on economic activity to contain the pandemic.

Recent progress on a fiscal stimulus bill is very good news. Twelve million unemployed workers are set to lose their benefits at the end of 2020 unless Congress acts. Consumer spending has been a bright spot in the second half of 2020 thanks to one-time stimulus checks and extra unemployment insurance benefits.