Jobless Claims Rose Last Week, Pausing Downward Trend

Wall Street Journal – Worker filings for initial unemployment benefits rose last week for the first time since late April but remained near a pandemic low as the labor market continues to heal from the impact of Covid-19.

Initial jobless claims rose by 37,000 to 412,000 in the week ended June 12. Despite the increase, the four-week moving average, which smooths out week-to-week volatility, reached a new pandemic low of 395,000. This was the lowest average level since March 2020, when the pandemic first took hold in the U.S.

The latest claims figures came as Covid-19 restrictions continue to wane, the U.S. posted a lower unemployment rate in May and demand increased for workers.

Thursday’s claims report also showed unemployment rolls shrank late last month. The number of ongoing benefit claims—a proxy for those receiving payments—fell by more than 500,000 to 14.8 million the week ended May 29. That includes those tapping benefits through pandemic-specific programs introduced last year, including those for self-employed workers.

The figure remains well above pre-pandemic levels, but is half the number tapping benefits a year earlier, according to the Labor Department. Half of states have announced that they will pull back on part or all of those federally backed benefits in the coming weeks—before they were slated to expire in early September.

The underlying cause of last week’s increase might be due to a number of factors such as workers deciding they aren’t ready to return to an office setting, seasonal volatility and changes in state-run programs, economists said. Pennsylvania, for instance, reported a large increase in new claims, which Augustine “Gus” Faucher, chief economist at the Pennsylvania-based PNC Financial Services Group, said likely was due to the state overhauling its dated unemployment computer system.

Pennsylvania’s labor department didn’t immediately respond to requests for comment.

“Some of what’s happening is that people are being called back to offices, and back to work. And employers are putting out policies for what their back-to-work scheme is and some employees are deciding that’s not what they want to do,” said Marianne Wanamaker, an associate professor of economics at the University of Tennessee, Knoxville.

Adam Kamins, director of economic research at Moody’s Analytics, said the weekly increase was likely due to temporary volatility, but he added that it would be a red flag moving forward if new claims continue to rise.

“If we see this happen again next week, then I think it’s a little harder to dismiss it as noise. And if we start to see the four-week moving averages begin to trend higher, then that says something significant,” Mr. Kamins said.

Despite last week’s increase, total new claims over each of the past several weeks have moved closer to what economists consider a normal range.

The long-term average of initial jobless claims dating back to 1967—including periods of expansion and recession—is 371,763, according to Labor Department data.

Mr. Kamins thinks the normal range for first-time applications is between 200,000 and 250,000, without factoring in recessions, which he said “would be the indicator that we’ve leveled off.”

Other economists offered different views on what a normal range of new jobless claims looks like, with totals of up to 350,000 a week.

The current level of claims is well down from the record weekly level of more than six million in early April 2020, early in the pandemic, but still above the weekly average of 218,000 in 2019, before Covid-19 took hold in the U.S.

Economists are predicting the number of people receiving benefits will drop off this summer. Several pandemic-related programs expire in early September, and 25 states are ending some or all of the enhanced benefits early as Republican policy makers worry that the benefits are discouraging people from seeking work.

Eight states are ending extra benefits this weekend.

The pandemic has also created imbalances, with record job openings, a shortage of available workers and signs employees are more willing to quit than at any other time in the past two decades.

“That means that employees sort of see better opportunities,” said Don Grimes, a research economist at the University of Michigan. “So when you have both of the layoffs going down and quits going up, that’s a very strong signal that the labor market is tightening and is pretty much in favor of employees finding a new job.”