US jobless claims slow as businesses start to reopen

The May jobs report set to be released on Friday is forecast to show the unemployment rate has soared to Great Depression-like levels at 19.5%

A woman, wearing a face mask, walks past a hair salon ready to reopen in Virginia. The ranks of US workers laid off is forecast to rise to Great Depression levels. AFP

As business reopenings picked up nationwide, Americans filed nearly 2 million applications for unemployment benefits last week, reflecting a slowing -- though far from a halt -- in job losses.

Initial jobless claims for regular state programmes totaled 1.88 million in the week ended May 30, Labour Department figures showed Thursday, down from 2.13 million the prior week. It was the first reading below 2 million since the coronavirus-related layoffs began en masse in mid-March. The median estimate in a Bloomberg survey of economists called for 1.83 million claims in the latest week.

Continuing claims -- the total number of Americans receiving unemployment benefits -- increased to 21.5 million in state programs the week ended May 23, compared with analyst estimates for a decline. Most states reported declines from the prior week, and the latest increase in part reflects quirks from biweekly filing rules in California, which showed an unadjusted rise of about 618,000.

US stock futures fell after the report. Separate data Thursday showed US trade in goods and services plunged in April to the lowest level in almost a decade.

The four-week moving average of continuing claims fell to 22.4 million from 22.7 million, the first decline of the pandemic.

In the week ended May 30, 36 states reported 623,073 initial claims for Pandemic Unemployment Assistance, the federal program that extends unemployment benefits to those not typically eligible like the self-employed.

Thursday’s report underscores the current dichotomy in the labor market. The layoffs are continuing -- and hitting the higher-wage workers and supervisors that escaped the initial wave of layoffs -- but at the same time, a multitude of Americans have headed back to work with varying degrees of business restrictions being eased in all 50 states.

The initial claims figure remains enormous at about nine times the pre-pandemic weekly average, but weeks of decreasing initial claims suggests the worst of the coronavirus-related layoffs is over. Even so, lingering effects from forced business closures and the pandemic itself will likely weigh on any recovery in the labor market for some time.

“Stubbornly elevated jobless claims are yet another statistic showing that labor market recovery will not be swift," Bloomberg’s economists Yelena Shulyatyeva said. "The latest claims data comes on the back of the non-manufacturing ISM survey, which showed the employment subindex barely budged in May from a record-low in April, contradicting the signal from a better-than-expected ADP employment.”

The May jobs report, out Friday, is forecast to show employers cut payrolls by 8 million, sending the unemployment rate soaring to Great Depression-like levels at 19.5 per cent. It will also show the distribution of job losses across industries. The reference week for the report is in mid-May, so last week’s jobless claims may reflect job losses not captured in the monthly employment report.

California and Florida both saw increases of more than 27,000 in initial claims filed last week; Mississippi was the only other state to show a rise, though minuscule. States seeing significant jumps in continuing claims in the week ended May 23 also included Texas, Pennsylvania, Oregon and Florida.

Georgia, one of the first states to reopen, saw its benefit rolls grow by 19,156 to 750,918.

Given the unprecedented surge of claims in recent months, many economists look to the non-seasonally adjusted figures for a more accurate read on claims. The total reported number under the federal PUA and state programs was 2.23 million last week, down from 3.21 million in the prior week. Many states that have already accepted tens of thousands of claims for the federal assistance are still showing zero claims on the national report.