Right before Thanksgiving, the Labor Department announced that weekly jobless claims have fallen to a record 52-year-low – thereby indicating the surprising extent to which the economy has recovered in the face of pandemic-related effects.
According to Labor Department data, worker filings for initial unemployment benefits dropped to 199,000, which represents a drop of 71,000 filings; remember: worker filings are commonly used as a proxy for layoffs. This new data effectively confirms that the U.S. has reached the lowest level of initial filings since November 15th, 1969.
This number was released after several calculations that adjusted for seasonal fluctuations. If we were to look at the rate of filings on an unadjusted basis, initial claims actually rose by 18,000 from the last week – now coming in at 258,000.
Nevertheless, this new number is all the more impressive when compared to what it was back in April of last year – standing at a whopping 6.1 million – and even compared to the average number of weekly claims recorded in 2019 – which came in around 218,000.
The Labor Department also released data on the 4-week moving average for initial claims – which spelled another positive trend. The average, which smooths out weekly volatility, reportedly dropped by 21,000 – now coming in at 252,250. According to the Labor Department, this is the lowest level recorded since the week ending March 14th, 2020. This number stands in stark contrast to the 900,000 applications recorded in early January.
The aforementioned filing rates certainly did not improve all on their own; a host of other changes to the labor market helped achieve our current situation. For example, U.S. employers reportedly added 531,000 jobs in October, which was the largest monthly gain recorded in 3 months. Data shows that the U.S. has made 18 million new hires since April of last year, and another 575,000 are expected to have been made in November. Once again, all of these numbers are even more impressive when we remember that employers were forced to cut down on 22 million jobs between March and April of 2020 in the face of the worsening pandemic.
As a result of more jobs, the unemployment rate was also able to drop; per Labor Department data, the unemployment rate dropped from 4.8% to 4.6%. According to High Frequency Economics chief U.S. economist, Rubeela Farooqi, “this [unemployment rate] decline, along with near-record levels of job openings, signals strengthening demand for labor.” As of the beginning of November, the number of individuals receiving unemployment payments dropped from 3.2 million to 2.4 million.
The Bigger Picture
Beyond job addings and unemployment decreases, the government also aided the economy in its recovery by issuing relief checks, setting extremely low interest rates, and allowing for the entire population to gain access to vaccines via piecemeal rollouts. With all of this being said, however, the U.S. economy is still short of around 4 million jobs compared to February 2020 levels. Why is this the case?
Well for one, the continued labor shortage has left the labor market with reportedly 3 million less workers than what it had pre-pandemic; while there are a myriad of reasons why these workers have left, the 3 commonly cited include retirement, fear of getting sick, and a lack of childcare options. These missing workers have impacted virtually every industry, from retail to hospitality, and have forced employers to raise pay and offer extensive benefits in order to stay afloat. Employer demand for workers, however, has not dwindled. If anything, it has actually increased from pre-pandemic levels; according to data from Indeed, for example, November job postings were up by 52% compared to February of last year.
Another reason is the volatility of Covid-19 infections nationwide. As per a recent Wall Street Journal analysis of data provided by John Hopkins University, Covid-19 cases increased 13.5% in a week as of November 22nd. According to a statement given by Navy Federal Credit Unioncorporate economist, Robert Frick, to the WSJ, “when [infections] climb quickly, layoffs—especially of lower-income workers in the service industry—are quick to happen. With every successive wave, there’s less of an effect on the economy…because more people are vaccinated and less fearful about going out and traveling. But it’s certainly a factor—and how much it is a factor depends on how bad the [current] Covid wave will be.”
In any case, the bottom line is that current labor market conditions seem to be improving. We will have to wait until the Labor Department’s next employment report, scheduled to be released on December 3rd, in order to see how the workforce was affected in November.
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