6 December 2021

U.S. Jobless Claims Remain at Elevated Level After Steady Declines

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U.S. jobless claims fell slightly to 385,000 last week, as worker filings for new unemployment benefits settled this summer at a level that is nearly double the pre-pandemic average.

The decrease in filings reported by the Labor Department on Thursday comes as the economic recovery faces risks from the Covid-19 surge driven by the Delta variant, supply-chain constraints and a shortage of available workers. The four-week moving average, which smooths out volatility in the weekly figures slightly decreased to 394,000.

So far, business and government responses to the Delta variant aren’t triggering an increase in U.S. layoffs, according to the Labor Department department report. The U.S. economy has experienced robust growth this year with the availability of vaccines, business reopenings, pent-up consumer demand and government aid, though economists say Delta poses a risk to growth should it cause widespread disruptions.

Continuing claims for regular and temporary pandemic-related federal programs, which provide an approximation of the number of people receiving benefits, dropped by 181,000 to 13 million in the week ended July 17, the most recent figures for that reading. The federal programs are set to expire in early September.

Jobless claims have hovered between 368,000 and 424,000 since late May, elevated above pre-pandemic levels but significantly lower than early in the pandemic. The 2019 weekly average, ahead of the pandemic, was 218,000.

The trend, some economists say, could be happening while the labor market continues to recover from the pandemic and be part of a development where claims remain higher because of greater awareness of unemployment insurance programs.

“Many people before the pandemic just simply didn’t apply for unemployment insurance, even if they were eligible,” Daniel Zhao, senior economist at job-search site Glassdoor, said. “So we might see permanent higher levels of claims, even if the jobs recovery is continuing,”

Mr. Zhao said that while the totals for new jobless claims have started to level off, he thinks the labor market and broader economy continue to steadily recover despite risks from the Covid-19 surge driven by the Delta variant and supply issues.

“There is a lot of potential for job growth in the coming months,” Mr. Zhao said.

The Labor Department will separately release the July employment report on Friday that will show whether hiring accelerated last month. Economists polled by the Journal estimate that 845,000 jobs were created last month, similar to June’s total, and that the unemployment rate fell to 5.7%.

Benjamin Widner, an economics professor at New Mexico State University, also expects job growth to continue, driven in part by industries that allow employees to work from home.

“IT technology, cybersecurity networks, all those types of remote-work jobs are going to be continuing to grow as we deal with the changing structure of the economy,” Mr. Widner said. He added that he also expects a slower decline in the number of weekly unemployment claims.

Many workers remain on the sidelines—the labor market in June was 6.5 million workers smaller than before the pandemic—and economists are watching to see if the surge in Delta variant cases affects the economy.

“What happens with Delta really depends on how people react to it. The virus itself is much worse in many ways, but at the same time, in previous surges there was no vaccine, and the only way people could avoid getting sick was if they disengaged from the economy completely,” said Ben Herzon, executive director of U.S. economics at IHS Markit. He added that the labor market’s recovery is vulnerable to the possibility of an even more lethal and contagious Covid-19 variant in the future.

Glassdoor’s Mr. Zhao said that the economic impact of the Delta variant will likely be limited compared with previous surges because of higher vaccinations and restrictions not being as severe as earlier in the pandemic.

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