Labor Market Warning Signal: Weekly Preliminary Claims For Unemployment Advantages Rise Once more


By Robert Hughes

Initial applications for regular state unemployment insurance amounted to 885,000 in the week ending December 12, an increase of 23,000 compared to the previous week’s revised upward of 862,000 (see first graph). Claims are now at their highest level since September 5, and the largest increases since March. The four-week average was 812,500, 34,250 higher than the previous average and the highest since October 17. The last week is the 39th week with historically massive claims. Prior to the lockdowns, initial applications averaged 212,000 in the first 10 weeks of 2020. A second consecutive increase in initial applications is a very worrying sign given renewed government restrictions on consumers and businesses. Persistent initial claims at such a historically high level suggest uncertain prospects for the recovery of the labor market and the economy (see first graphic).

The number of ongoing claims for government unemployment programs was 5.766 million for the week ended November 28, an increase of 552,349 from the previous week. This is the first increase since August 29 (see second graph). In the same week in 2019, ongoing claims were 1.752 million.

Sustained entitlements in all federal programs also rose last week to 14.881 million in the week ended November 28, an increase of 1,050,932. This is the largest increase since August 22nd. Since the beginning of September, entitlements in all federal programs averaged 14.175 million (see second table).

The total number of people receiving benefits in all unemployment programs, including all emergency programs, was 20.647 million for the week ended November 28, an increase of 1.603 million from the previous week. While ongoing entitlements tended to be lower for state programs, federal programs remained flat.

Last week’s increases for both categories suggest that the labor market is suddenly weakening as government restrictions on consumers and businesses hurt the economy. Government-imposed restrictions designed to slow the spread of Covid-19 pose a significant threat to prospects for economic growth. The longer consumers remain constrained and businesses remain closed or limited, the less certain it will be that the labor market will recover the greater the likelihood of a slow and protracted economic recovery.

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Editor’s note: The summary bullets for this article were selected by the editors of Seeking Alpha.

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