New jobless claims saw another unexpected spike last week.
The most recent Department of Labor data revealed 419,000 claims for the week ending on July 17 — an increase in 51,000 from the previous week’s levels that again exceeds economists’ predictions.
The Wall Street Journal explained:
The number of Americans receiving jobless payments fell this month to the lowest level since early in the coronavirus pandemic, but first-time applications rose as supply constraints persist in the auto industry.
Continuing payments made through all unemployment benefit programs fell by 1.3 million in the week ended July 3, to 12.6 million, the Labor Department said Thursday. That was the lowest level since late March 2020, when new programs responding to the pandemic first came online.
In recent weeks about half of states have acted to end enhanced and extended unemployment benefits. The end of pandemic programs in Texas drove the latest decrease.
“The expectation is that this will spur more job-seeking among unemployed Texans as demand for labor improves,” PNC Financial Services chief economist Gus Faucher told The Wall Street Journal. “Many employers have said that they would like to hire, but that the supply of workers has not kept up.”
Unemployment data released over the past several months by the Department of Labor has revealed an uneven job market recovery. Despite the American economy’s rebound from COVID-19 and the lockdown-induced recession, workers have been slow to return to their positions.
The Daily Wire reported, for instance, that the week ending on July 3 saw 373,000 first-time jobless claims — a figure that outpaced the 350,000 claims forecasted by economists surveyed by Dow Jones. The week ending on June 12 saw 412,000 claims, representing an increase of 37,000 from the previous week’s levels.
Many experts — including economists at the Federal Reserve — point to enhanced federal unemployment benefits as a factor distorting the labor market.
As the Fed’s most recent semiannual report to Congress explains:
With economic activity rebounding, labor demand rose briskly in the spring, while the supply of labor struggled to keep up. Employers reported widespread hiring difficulties, job openings jumped to about 30 percent above the average level for 2019, and the ratio of job openings to job seekers surged… enhanced unemployment benefits have allowed potential workers to be more selective and reduce the intensity of their job search.
The support from enhanced UI has been especially consequential for lower-wage workers, who have borne the brunt of recent job losses and who have benefited most from broader coverage and higher benefit levels.
Though the central bank explicitly named the federal unemployment insurance as a cause of the labor shortages, it stopped short of urging policymakers to rescind the policy before its automatic expiration in September.