US Initial Claims Decline, But Outlook Remains Unclear

As US Congress debates the fate of the extended jobless claims program, initial claims fell by 249,000 in the August 1 week to a level of 1.186 million, well below the 1.442 million level expected and the lowest weekly level since the start of COVID-19.

The enhanced Federal unemployment payments of $600 per week ended on July 31, so some potential filers may have chosen to wait to see if an extension is agreed upon. However, the 1.186 million new filers would suggest that displaced workers, some newly released, are still seeking benefits.

The four-week moving average for initial claims fell by 31,000 to 1.338 million in the current week, close to level in the July 11 week before the recent increases, the Labor Department reported Thursday. The average could rise further in the next few weeks until those gains roll out of the four-week window.

Unadjusted claims fell by 222,852 in the current week after an increase of 169,881 in the previous week. Seasonal adjustment factors expected small increase in the current week, leading to the large decrease in the seasonally adjusted figure. There were unadjusted declines in several states, particularly those impacted by the COVID-19 resurgence. California, Texas, Florida, and Georgia all posted declines.

The Labor Department reported that 655,707 workers filed under Federal Pandemic Unemployment Assistance on an unadjusted basis in the current week, down from 908,800 in the previous week. This program extends the length of benefits for those whose regular term has run out. While the number has been declining in recent weeks, it is a good indication of long-term unemployment.

The level of continuing claims fell by 844,000 to 16.107 million in the July 25 week, the lowest since April. Like initial claims, it is a positive sign. However, the level of filings and the outlook for job hunting and further layoffs suggests the both initial and continuing will be elevated for some time.

The Challenger monthly layoff report, released earlier on Thursday, showed 262,649 layoff plans in July after 170,219 in June, with a 109,940 job cuts reported by the hard-hit entertainment and leisure sector.

There were 63,517 new cuts attributed directly to the pandemic and an additional 77,092 July layoffs due to market conditions.

Challenger said that many of the job losses attributed to the crisis are likely to be permanent and additional layoffs are expected due to the resurgence of COVID-19 cases. “The downturn is far from over, especially as COVID cases rise around the country. Consumers are buying fewer goods and services, businesses are closing, and bankruptcies are rising,” Challenger senior vice president Andrew Challenger said.

One sector that increased hiring in July was warehousing, as online shopping is expected to expand further in the coming months.


Colin Lambert

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