Initial claims for regular state unemployment insurance rose slightly, adding 14,000 for the week ended March 26, bringing it to 202,000, just below the previous decade’s multi-decade low (see first chart). Claims continue to bounce, but have dropped to seven in the last ten weeks Despite the increase, claims remained below the January-February 2020 average of 212,000 before the lockdown. By long-term historical comparison, the initial claims are very low.
The four-week average fell last week, posting the seventh drop in the last eight weeks, coming in at 208,500, the first dip below the 212,000 threshold since Jan. 8. Weekly preliminary demand data suggests that the labor market remains very tight. However, Russia’s aggression in Ukraine is disrupting the world economy and the start of the Fed’s austerity cycle could lead to instability in economic activity in the coming months.
The number of ongoing claims for the state unemployment program totaled 1.718 million for the week ended March 12, down 81,430 from the previous week (see second chart). State claims have dropped to seven in the last nine weeks and are below their pre-epidemic level of 2.111 million since October 2021 (see second chart).
For the week ended March 12, the total number of continued claims in all federal programs was only 57,474, a drop of 545. For January and February 2020, the federal continued claims average was 34,174. Although current numbers are above the pre-epidemic average, they reflect only a fraction of the 16.6 million peaks and essentially the termination of the Emergency Unemployment Assistance Program and the Emergency Emergency UC program.
The latest results from the combined federal and state programs put the total number of people claiming benefits in all unemployment programs for the week ended March 12 at 1.776 million, down 81,975 from the previous week. The latest results are below 2 million in the fifth week in a row.
Despite some volatility, initial demand has been on a downward trend in recent weeks and is at extremely low levels by historical comparisons. The overall low level of demand combined with the high number of open jobs indicates that the labor market has remained very tight. With persistent labor shortages, material shortages, and logistical problems, production recovery across the economy as a whole can slow down and maintain upward pressure on prices. In addition, Russia’s aggression in Ukraine has had a dramatic effect on geopolitical and global economic turmoil in capital and commodity markets, triggering new waves of trade disruptions. In addition, the start of a new Fed tightening cycle will likely weigh on economic activity. The outlook remains highly uncertain.