Downsizing and massive entrenchment of the labour force amidst the pandemic have wreaked havoc on the already deteriorating job market of the US. Post one year to the beginning of the COVID outbreak, not a significant change has been noticed in the trend of the rising unemployment. As per the recent data furnished by the New York Times, millions of Americans are still facing hardships finding a minimal source of income.
To understand this situation better, we will start by comprehending the US Jobless Claims as reported by the US Department of Labour. It is a statistical measure of the number of people filing for unemployment insurance, either for the first time(initial claim) or getting continuing insurance benefits(continuing claims).
The Initial Claim is an estimate of the number of people who have been unemployed for the very first time, as they have applied for unemployment insurance. On the other hand, the Continuing Claim is an estimate of the number of people who were already unemployed and are still in that same area of being unemployed.
On every initial filing, a $300 per week supplement is being provided for the jobless claims. Additional incentives are calculated by the Labour Department which may vary from $1000 all the way up to $5000, depending on the facts of the case. However, this program has already ended in several states.
These Unemployment Insurance Benefits are generally paid by state governments to workers who have become unemployed through no fault of their own, funded in large part by State and Federal payroll taxes levied on employers. Employees in states like Alaska, New Jersey, and Pennsylvania are also required to contribute to the program in order to make sure that there is no deficiency of amount to be paid.
There have been interesting changes as per the latest numbers in the reports of the US Department of Labour, showing a lot of movement in the economic and the financial conditions in the US. Dow Jones reported 374,000 new initial filings for unemployment insurance, against an estimate of 350,000. These numbers might be an indicator of the hurdles that the US economy is facing after the rapid job growth in the early months of 2021.
However, there is a silver lining to this entire situation. The number of continuing claims came down to 3.34 million, with a decrease of 145,000 this week. This shows that people who were already unemployed have now found employment. On the other hand, people already having a job have been sacked from their positions. The matter of concern, in this case, is the difference in the number of initial and continuing claims. There is a wide difference of 229,000 filings between the two numbers stated above. This means 229,000 more people have been sacked from their positions, other than the ones who have been replaced.
The Congressional Budget Office has projected a year-long growth of 6.7%. However, in the April-June quarter, the growth was an exceptional 10% which has been the highest since 1984. In this high-paced recovery of the economy, there have been 9.27 Million job postings, the highest since the change of the century. The pay of employees has been increased by an average of 3.6% to retain the best talent. On the other hand, the same industries are sacking the employees who have provided lesser returns in the past performance indices.
“While the pace of firings is still above the 200k range we saw pre-Covid, it actually is only slightly above the average seen in the expansion in the mid [2000s] where from ’03-’08 it averaged 335k. Continuing claims continue to fall as about half the states have gotten rid of expanded benefits and there is clearly a large amount of job openings for the taking with companies utilizing more enticements such as hiring bonuses to bring people back.” – Peter Boockvar, CIO – Bleakley Advisory Group.
Some surveys in the country have also shown that employers have adopted a rather strict screening process for their employees. This might be due to the effect of Covid, the employers are wanting a higher rate of return on the amount they invest in an employee. Hence, the number of new people being employed is much lower than the number of people being sacked.
Many economists have said that in the coming few months, this data on the jobless claims may be extremely volatile due to the current situation of the economy. Economists are also of the belief that there shall be an improvement of around 5% in the labour market around the second half of the year.
Even with the latest increase, new weekly filings for jobless benefits have more than halved since the beginning of the year as health concerns abate and pent-up demand fuels hiring at businesses like hotels and restaurants.
States like Oklahoma, Nebraska, and Indiana which were earlier declared to end the Pandemic Unemployment Assistance have seen no initial filings in the past week.
The major employment creators have been identified as the Non-Farm Sector. However, the unemployment rate has been higher than was anticipated, i.e., the rate has been 5.9% whereas the anticipation was 5.6%.
The government is trying to phase out the Pandemic Unemployment Assistance Program in most states. States like Texas and Nebraska have had huge numbers of initial claims despite the government’s attempt to phase out the programme. This may be an indication of the assistance turning to the regular state programmes as Covid is being seen as the new normal. The State Governments are allowed to borrow funds from the treasury in case of a shortage of funds.
The latest jobs report showed payrolls increased 850,000 in June, the largest advance in 10 months, suggesting firms were having greater success a month later in recruiting workers to fill open positions. Still, vacancies stood at a record high in May, pointing to a mismatch between labour supply and demand.
That’s all for this week! We hope you liked it and would love to know your thoughts in the comment section. This article is written and curated by Harsh Harlalka and Raj Kabra.