Weekly Jobless Report Improves As More US Businesses Reopen

By some metrics, the U.S. economy continues to improve from the worst of the coronavirus impact. In the first week of June, continuing jobless claims fell from 21.27 million to 20.93 million, while initial jobless claims declined from 1.9 million to 1.54 million, according to the Department of Labor.

Economists had projected figures of 20 million and 1.55 million, respectively.

The Impact Of Consumer Demand, Federal Stimulus: “We’re slowly seeing the labor market recovery begin to take form,” Morgan Stanley economist Robert Rosener told the New York Times. “[However], there’s still an enormous amount of layoffs going on.”

Those layoffs could continue for two reasons. First, demand remains depressed in reopened communities.

“The labor market will continue to be under duress as businesses adapt to an economy running well below capacity, resulting in elevated layoffs,” Bank of American economist Alex Lin told Reuters.

Second, federal stimulus funds are drying up.

“We are seeing the labor market high on PPP [Paycheck Protection Program] money,” Sung Won Sohn, a business economics professor at Loyola Marymount University, told Reuters. “Once it runs out, we might see a significant increase in layoffs again.”

Given the extent of unemployment, some experts expect the recovery to drag on for some time.

“The steady retreat in claims is a positive development, but the labor market has suffered a traumatic blow and a full recovery will be measured in years, not weeks or months,” Nancy Vanden Houten, lead U.S. economist at Oxford Economics, told Reuters. “The figures don’t capture the full extent of the blow dealt to workers during this unique crisis.”

The Context: On Wednesday, the Federal Reserve said it expects a slow national recovery from the coronavirus, with the unemployment rate closing out the year at 9.3%. It expects the rate, which came in at 13.3% in May, to hover at around 6.5% at the end of 2021.

“Unemployment remains historically high,” Fed Chair Jerome Powell said during a news conference. “My assumption is there will be a significant chunk ... well into the millions of people, who don’t get to go back to their old job ... and there may not be a job in that industry for them for some time.”

The Fed said it would continue to buy bonds for some time and maintain interest rates at zero likely through 2022 to stimulate recovery. As things currently stand, Fed leaders forecast, at the median, a 6.5% economic contraction in 2020.

Other economists aren’t as optimistic.

“By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms and governments,” Laurence Boone, chief economist at the Organization for Economic Co-operation and Development, wrote in a Wednesday report.

The Congressional Budget Office predicts an 11% unemployment rate by the end of 2020, with the rate dropping to just 9.3% in 2021. S&P Global doesn’t expect a return to pre-coronavirus labor market conditions before 2023.

Other Economic Figures: The U.S. will release numbers on the nation’s natural gas storage, bill auctions and 30-year bond auction, as well as global agricultural transactions, later Thursday morning.

Related Links:

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