UI Claims Drop Below 1 Million for First Time in 21 Weeks

Initial unemployment insurance (UI) claims dropped below 1 million last week for the first time in 21 weeks. The slow decline in claims over the course of the crisis is a sign that layoffs are slowing but the high level of claims points to the enormous churn still happening in the labor market. Weekly claims are now close to the levels seen at the peak of the Great Recession, a stark reminder that even exiting the worst of the COVID-19 crisis only places us back at the worst of the Great Recession.

Initial UI claims fell on a seasonally adjusted basis, dropping to 963,000 from 1.12 million, according to the latest figures from the Department of Labor for the week ending August 8. Non-seasonally adjusted initial claims also fell to 831,856, dropping below the Great Recession peak of 956,791 set in January 2009. 

Pandemic Unemployment Assistance (PUA) initial claims dropped to 488,622, non-seasonally adjusted. PUA and UI claims combined have fallen rapidly over the last four weeks. Reporting issues have plagued the PUA program, but it seems like numbers may be falling as backlogs for the program diminish.

Continuing claims for UI fell to 15.5 million for the week ending Aug 1, 2020, on a seasonally adjusted basis, and to 15.2 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.

Last Friday's jobs report confirmed that the recovery slowed in July, with only 1.8 million jobs added despite 4.8 million being added in June. At the same time, the report did little to break the Congressional deadlock over a new relief package. Additionally, the executive actions by the President signed on Saturday to implement a new federally-backed unemployment benefits program seems likely to face a host of legal and practical challenges. Ultimately, the question remains whether the economy can continue on its path to recovery without additional relief when we remain in a crisis deeper than the Great Recession.