The slow reopening of the economy has done little to boost the job market and stall the unemployment rate.
Another 2.4 million Americans filed initial jobless claims for the week ending May 16. This brings the total since late March to an incredible 38.6 million.
Continuing unemployment claims, those who file to receive ongoing benefits, added another 2.5 million through May 9. This brings the total to 25.1 million.
Observers were hoping that they would see the number of continuing claims to begin to decrease. This comes after last week’s report only showed an increase of 500,000 claims, the smallest increase since March.
With that figure jumping by 2.5 million, it dashed those hopes.
“It is looking like May is shaping up to be worse for the labor market than we had initially thought,” economists at Jefferies said in a recent note. “We noted in our response to the April employment data that we expected that we would see another drop in payrolls in May of about 1 million, followed by a strong rebound in June. However, the stubbornly high levels of both initial and continuing claims suggest that we are actually in store for another historic drop in payrolls in May.”
Hoping for a Drop
Diane Swonk, chief economist at Grant Thornton, was also hoping to see a decrease in continuing claims. However, she says we may see some improvement soon. It’s possible as companies use money from the Payroll Protection Program to bring back workers.
“I’d love to see a big drop in continuing claims because that would really be a sign of rehiring,” she said, but also cautions that May is shaping up to be a terrible month for workers, who may find that their temporary unemployment may not be so temporary. “This is the week of the survey. … It tells us May is going to be another bloody month, with a lot of downward revisions for an even worse month of April,” said Swonk. “May will be a much worse unemployment rate because people will be looking for jobs again and their layoffs weren’t as temporary as they had hoped.”
Very real concerns exist that the unemployment figures fare worse than the actually reported ones. These concerns come as states are still overwhelmed by the sheer number of claims and still haven’t processed the backlog.
It’s hard to imagine what the real unemployment rate would be if a backlog of initial filings does exist.
Chris Rupkey, chief financial economist at MUFG Union Bank, said if you add in the initial claims from last week’s report, “That would put the unemployment rate at about 25.4%”
Some states are seeing relatively little impact on employment due to the pandemic. Utah and South Dakota are seeing unemployment rates remain below 10%, while other states have been crippled by job losses.
Georgia and Kentucky have the highest unemployment rates in the country, where the jobless rates are approaching 40 percent. Other states seeing unemployment rates at or near 30 percent include Washington and Louisiana. Also included are Michigan, Rhode Island, Nevada and Pennsylvania, as per Deutsche Bank Research.