Initial jobless claims declined moderately last week to 787,000 for the week ended December 26 – a decline of 19,000 from the prior week’s upwardly revised 806,000. That result was modestly better than the optimistic end of the range of forecasts for the week.
Despite some easing in the weekly tally, the four-week moving average rose by nearly 18,000 to over 836,000, reflecting the surge in claims over the past month. Recurring claims eased by about 80,000 to a still elevated 5.48 million.
The recent surge in claims came as rising numbers of COVID-19 cases and increased restrictions dampened spending and weighed on economic activity across the country.
Although significant progress has been made in returning workers to payrolls since the worst days of the recession earlier this year, by virtually any measure, labor market conditions are still challenging. More concerning is the near-term outlook for the economy as the U.S. braces for what is expected to be some challenging months ahead in the fight against COVID-19.
Job creation has slowed considerably in recent months and is forecast to be weaker still in December as a swathe of economic data indicates a continued slowdown in economic activity. The uptick in initial jobless claims is another indication that the recovery is stalling.
By virtually any historical measure, the unemployment rate and ongoing jobless claims data point to a challenging jobs environment, with first-time claims still running consistently above the worst levels of any single weekly tally in the last recession. The fact that conditions have improved dramatically from earlier this year when the economy was contracting at an unprecedented pace is directionally positive but provides little consolation to those directly impacted and still clearly indicates a sizable gap between the pre-pandemic state of the labor markets and conditions today.
On a brighter note, the recent passage of legislation to extend enhanced jobless benefits will provide some support for sidelined workers while the renewal of funding for the Paycheck Protection Program and payroll tax credits directed to employers as a means of easing the cost of retaining workers should also help to slow the pace of layoffs.
The risk presented by COVID-19 and policies directed at reducing its spread remains a significant near-term headwind to the slowing economy. The fact that the distribution of multiple vaccines is underway is a reason for hope, but it will take time to inoculate enough Americans to have a meaningful impact.
In the meantime, the Coronavirus relief bill should help to provide a bridge for many Americans who have lost their jobs and for small businesses and nonprofits that are struggling in the current environment.
The bottom line is that the labor market remains vulnerable in the near term as the economy attempts to grind ahead against the weight of surging health risks in the coming months.
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