UI Claims Jump Back Over 1 Million

Initial unemployment insurance (UI) claims rose back over 1 million last week, after dropping below the 1 million mark for the first time since March. While the jump is a modest one, the sudden uptick is a reminder that the recovery is progressing unevenly and economic gains can be easily reversed if conditions worsen.

Initial UI claims rose on a seasonally adjusted basis, climbing to 1.11 million from 971,000, according to the latest figures from the Department of Labor for the week ending Aug 15. Non-seasonally adjusted initial claims rose as well to 891,510, still slightly below the Great Recession peak of 956,791 set in January 2009. 

Pandemic Unemployment Assistance (PUA) initial claims rose to 542,797, non-seasonally adjusted. PUA and UI claims combined had fallen rapidly over the last few weeks, but rose last week for the first time since early July. Reporting issues, however, have plagued the PUA program, and some increases last week seem unusual. For example, Rhode Island added 17,506 PUA claims, an improbably large 31 percent of their previous continuing claims.

Continuing claims for UI fell to 14.8 million for the week ending Aug 8, 2020, on a seasonally adjusted basis, and to 14.3 million on a non-seasonally adjusted basis. The continuing claims data shows a slow but noticeable improvement in the labor market since late June. Despite the slow fall, continuing claims are still more than twice the level seen at the Great Recession’s peak.

Eleven states have been approved to disburse the $300/week supplementary benefits from the new program set up by executive action two weeks ago. Crucially, however, it remains unclear how quickly the benefits can begin flowing to unemployed Americans who've now been cut off from the $600/week CARES Act benefits for four weeks. We are not yet seeing a sharp economic impact from the expiration of the benefits, but the benefits represented such a significant boost of income to millions of Americans, that it seems unlikely that the effects are not there. Ultimately, these negative effects may be hidden from topline economic data, manifesting as a slower-than-expected recovery rather than an outright decline.