Initial claims for state unemployment benefits in the U.S. fell to 684,000 in late March for the first time in a year. Believe it or not, that’s important. “Initial claims” sounds like something only an economist could love (and a nerdy one at that). This weekly statistic represents the first filing for unemployment for a specific claim—basically layoffs or jobs that have recently been eliminated. We normally don’t pay much attention to it, but it got more headlines during the pandemic as a weekly barometer for how the economy was faring.
Since records have been kept, the highest numbers we had ever seen were 695,000 at the worst of the 1980s downturn and 665,000 during the Great Recession over a decade ago. That was, however, before the pandemic surfaced.
In early 2020, as the economy was in its 11th year of expansion, initial claims were lower than they had been in decades at around 200,000 (there are always some just due to the churn in the economy). For the week of March 7, 2020, initial claims were 211,000. Just two weeks later on March 28, they were 6,867,000 (about 10 times the historic high).
Through April of last year, initial claims remained stratospherically high, with over 6.6 million on April 4, 5.2 million on April 11, and 4.4 million on April 18. A total of nearly 20.2 million initial claims were filed in April, with 12.3 million more in May. Those were dark days, and the jobs lost all too often brought tragic human costs including financial distress, failing businesses, or insufficient money for basic necessities.
Through the summer and fall, millions more initial claims were filed. While some of these filings represent individuals who were dropped, rehired, and then unemployed again, the scope of the disrupted lives is difficult to comprehend.
To cross below 700,000 new claims finally puts the economy back to a place it’s been before—high by any standard, but not unprecedented. Equally important, when we have seen this level in the past, we have successfully returned to prosperity in a reasonable amount of time. Simply stated, we have done this before.
When we look back on the pandemic and the economic crisis which ensued, we will no doubt take note of when the bad news settled back to a level which is at least somewhat familiar, if infrequent, territory. The coming weeks could well see initial claims bounce back above 700,000 on occasion, particularly if the recent rise in COVID-19 cases morphs into a fourth surge before vaccinations generate sufficient immunity in the population to permit more normal life. Nonetheless, an important milestone in our journey has now occurred. Stay safe.