U.S. Unemployment Claims Remain Stubbornly High

on Sep 11, 2020
Updated: Dec 19, 2022

The unemployment claims in the United States showed no improvement from the previous week, sending a mixed message to the markets about the state of the labor force. On the one hand, the labor market did not deteriorate on a weekly basis. On the other hand, another 884k people applied for unemployment benefits.

When talking about close to a million people applying for unemployment benefits in the largest economy in the world, it is impossible not to feel a bit of vertigo. Moving forward, the situation on the labor market remains extremely complicated, with challenges from all fronts.

Schools Reopen

As fall starts in the North hemisphere, children go back to school. During the pandemic, online schooling was an answer by the time states were under different measures of lockdown.

Since we do not know the path this pandemic takes, online schooling remains an option, albeit everyone agrees that kids need to go to school physically. The problem with online schooling is that it could force more than four million American parents out of the labor force.

Hence, it is not that the state considers online schooling detrimental or useless. It is just that it affects the labor force and the economy in such a way that it makes it exceedingly difficult for the economy to recover and grow again.

Non-Seasonal Adjusted Initial Unemployment Claims Trend Higher – Again

For the fourth week in a row, the initial claims on a non-seasonal adjusted basis (NSA), were on the rise. The problem here is that this is happening six months into the crisis. It sends a tough message to digest, no matter how you look at the data.

From the initial V-shape recovery hopes to the current reality, there is a big difference. Once again, reality begs to differ, and people simply have a hard time finding or keeping a job.

If we couple yesterday’s data with what the NFP showed last Friday, we have a better picture ahead of us. Remember that the NFP report comes out monthly, while the initial jobless claims every week. Both reports refer to the previous period – month, respectively week.

The NFP report showed that more than half of those in temporary layoffs have been out of work for more than fifteen weeks. As a consequence, permanent layoffs will continue to rise, with a direct effect on the weekly unemployment claims report.

In plain English – it is likely that the situation gets worse before it gets better.