One day before the April employment report release, data released on Thursday showcased the damage the national shutdown continues to have on labour market conditions.
Initial claims fell by 677,000 to 3.169 million in the May 2 week, above the 3.041 million level expected. The state breakdowns suggest that backlogs are finally being worked down and the filing pace is slowing.
However, the level remains extremely high as some companies which had originally held off on layoffs have been forced to trim their staff in recent weeks.
The total number of new claims filed since the start of the COVID-related shutdowns seven weeks ago has reached 33.5 million.
Unadjusted claims fell by 646,613 million in the current week on declines in Florida (-259,912), Alabama (-46,783), Georgia (-39,681), and Ohio (-32,553). New York, the hardest hit by COVID-19, reported 24,171 fewer claims in the most recent week.
Continuing claims, the total number of people currently receiving benefits, rose by 4.636 million to a record 22.647 million in April 25 week, lifting the insured rate to 15.5% from 12.4% in the previous week. The upward trend will continue for several more weeks.
Earlier Thursday, Challenger, Gray & Christmas reported a record 671,129 layoffs in April, with the entertainment and leisure sector leading the cuts, followed by the retail sector.
Challenger said that while many businesses say they intend to rehire workers at the end of the crisis, most of the jobs will not return “any time soon”. Small- and medium-sized businesses are struggling to stay in business and keep workers on payroll at a time when the lack of jobs means less spending at those businesses.
A surge in hiring plans also included in the Challenger data was due almost entirely to Instacart, a grocery delivery service that has experienced a spike in business since stay-at-home orders were instituted in mid-March. Instacart announced plans to hire 250,000 workers in April after an announcement of 300,000 in March.
Released at the same time as initial claims, BLS data showed the sharp contraction in economic activity in the first quarter pulled down productivity, though not as much as expected due to a large decline in hours worked. Unit labour cost growth surged as a result of the productivity decline.
The preliminary estimate of nonfarm productivity fell by 2.5% in the first quarter, above the 5.5% decline expected. This followed a 1.2% increase in the previous quarter.
Output fell by 6.2% in the quarter, in line with the contraction in the GDP data released last week. However, hours worked fell by 3.8%, offsetting some of the output decline.
Due to the quarterly decline, productivity now stands only 0.3% above its year-ago level, a much slower pace than the 1.8% year-on-year rate in the fourth quarter.
Unit labour costs rose by 4.8% in first quarter, slightly below the 5.0% increase expected, after a 0.9% gain in the previous quarter. While productivity declined, compensation costs rose by 2.2% in the quarter after a 2.1% increase in the previous quarter.
Labour costs are now up 1.5% yoy, a slower pace than the 1.7% yoy rise in the fourth quarter.