Backlogs, second wave of layoffs keeping U.S. weekly jobless claims high

WASHINGTON (Reuters) – Millions more Americans likely filed for unemployment benefits last week as backlogs continue to be cleared and disruptions from the novel coronavirus unleash a second wave of layoffs, pointing to another month of staggering job losses in May.

FILE PHOTO: People who lost their jobs wait in line to file for unemployment following an outbreak of the coronavirus disease (COVID-19), at an Arkansas Workforce Center in Fayetteville, Arkansas, U.S. April 6, 2020. REUTERS/Nick Oxford/File Photo

The Labor Department’s weekly jobless claims report on Thursday, the most timely data on the economy’s health, could also offer some early clues on how quickly businesses rehire workers as they reopen and of the success of the government’s Paycheck Protection Program (PPP).

“None of these states had systems set up to process the unprecedented amount of claims in one fell swoop, so there are backlogs,” said Steve Blitz, chief U.S. economist at TS Lombard in New York. “We continue to read of firms cutting their workforce and these are firms that were not immediately impacted by the mandated contraction from COVID-19.”

A broad shutdown of the country in mid-March to contain the spread of COVID-19 has resulted in the worst labor market since the Great Depression and undermined the broader economy.

Initial claims for state unemployment benefits likely totaled a seasonally adjusted 2.4 million for the week ended May 16, according to a Reuters survey of economists. Data for the prior week is likely to be revised to show applications substantially down from the previously reported 2.981 million after Connecticut said it had misreported its numbers.

Claims have been gradually declining since hitting a record 6.867 million in the week ended March 28. Economists said claims were also being kept elevated as states were now processing applications for gig workers and many others to access federal government benefits. These workers generally do not qualify for regular unemployment insurance, but to get federal aid for coronavirus-related job losses they must first file for state benefits and be denied.


Last week’s filings would lift the number of people who filed claims for unemployment benefits to about 38.9 million since March 21. Economists caution that this figure was not the number of jobs lost due to the pandemic because of the technical difficulties and procedures at state unemployment offices.

They also noted that this number could include people who have since found jobs.

Last week’s claims data covered the week during which the government surveyed establishments for the non farm payrolls portion of May’s employment report. Based on the Reuters estimate, claims probably dropped by 2 million between the April and May survey weeks. The economy lost a record 20.5 million jobs in April.

With the initial claims numbers being somewhat distorted by processing issues, attention has shifted to the number of people staying on unemployment benefits rolls.

These so-called continuing claims numbers are reported with a one-week lag, but are considered a better gauge of the labor market.

Continuing claims could also offer a glimpse into how soon the economy ramps up. They can also gauge companies’ ability to get people off unemployment or keep workers on payrolls as they access their share of a historic fiscal package worth nearly $3 trillion, which offered loans that could be partially forgiven if they were used for employee salaries.

“Most recently, continuing claims have plateaued and suggest that we could be seeing an early sign that employers are calling back employees as states begin to re-open,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “Focus should continue to center on continuing claims, which provide a better idea of the challenges unemployed workers face and also some insight into the hit to GDP growth.”   

Continuing claims rose only 456,000 to a record 22.833 million for the week ending May 2. They are expected to have increase to 24.765 million in the week ending May 9, according to the Reuters survey.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama

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