U.S.: Pace of decline slows in jobless claims

*U.S. initial jobless claims declined by 58k to 1.51m last week, the smallest decline over the last 11 weeks, as layoffs remain stubbornly high (Chart 1). Initial jobless claims do not capture the rate of hiring and re-hiring, which we expect to outweigh layoffs as businesses reopen.

*Continuing claims for regular state unemployment compensation (reported with a two-week lag) declined to 20.5m during the week ending June 6 from 20.6m in the prior week (Chart 2). Continuing claims dropped significantly in mid-May, as many states started reopening, but the pace of declines have since slowed.

A comprehensive count of continuing jobless claims (reported with a three-week lag), which includes the regular state unemployment compensation program plus the special pandemic unemployment benefits, shows that the total number of persons receiving unemployment benefits during the week ending May 30 was 29.2m (non-seasonally adjusted), well above the 18.6m persons (non-seasonally adjusted) that received “regular state” benefits that week (Chart 3). The pandemic unemployment benefits program includes independent contractors and persons who are unable to work because of COVID-19 related reasons. These persons are not necessarily characterized as unemployed in the Bureau of Labor Statistics’ (BLS) Official Employment Report, providing another source of discrepancy between the jobless claims data and the unemployment rate.

The Department of Labor estimates that ~32% of states experienced an increase in initial jobless claims last week, less than the 45% in the prior week. States reporting the highest number of initial jobless claims (in non-seasonally adjusted terms) for the week ending June 13 include California (243k), Georgia (131k), and New York (96k). Texas had the largest increase in claims (+4k to 94k) and Florida had the largest decrease (-26k to 86k).

We expect significant labor market improvement in the coming months, with another sizable increase in nonfarm payrolls in June. This will reduce the unemployment rate, but business restructuring and permanent closures will generate ongoing layoffs and sizable labor market churn into and out of various jobs in different industries.

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Chart 2:

Chart 3:

Roiana Reid, roiana.reid@berenberg-us.com

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