Weekly Initial Claims for Unemployment Benefits Fell Slightly, Remain Very Low

Initial claims for regular state unemployment insurance fell by 15,000 for the week ending March 12, coming in at 214,000 (see first chart). Claims have been bouncing around in recent weeks, posting declines in three of the last five weeks that total 48,000, more than offsetting two increases that totaled 37,000. The level of claims remains slightly above the January and February average of 212,000 prior to the lockdowns. By long-term historical comparison, initial claims remain very low. The four-week average also fell in the latest week, posting the fifth drop in the last six weeks, coming in at 223,000, a drop of 8,750. Weekly initial claims data continue to suggest the labor market remains very tight. However, disruptions to the global economy due to the Russian invasion of Ukraine and the start of a Fed tightening cycle may cause volatility to economic activity in coming months.

The number of ongoing claims for state unemployment programs totaled 1.908 million for the week ending February 26, a rise of 59,752 from the prior week (see second chart). State continuing claims have declined in five of the past seven weeks and remain below their pre-pandemic level of 2.111 million (see second chart).

Continuing claims in all federal programs totaled just 60,853 for the week ending February 26, a drop of 236. For January and February 2020, the average for Federal continuing claims was 34,174. Though the current numbers are above the pre-pandemic average, they are just a fraction of the 16.6 million peak and largely reflect the end of the emergency Pandemic Unemployment Assistance program and the Pandemic Emergency UC program.

The latest results for the combined Federal and state programs put the total number of people claiming benefits in all unemployment programs at 1.969 million for the week ended February 26, an increase of 59,516 from the prior week. The latest result is the third week in a row below 2 million.

Despite some volatility over the last few weeks, initial claims remain at an extremely low level by historical comparison. The overall low level of claims combined with the high number of open jobs suggest the labor market remains very tight. Continuing labor shortages, along with materials shortages and logistical issues, are likely to continue to slow the recovery in production across the economy and sustain upward pressure on prices. In addition, geopolitical and global economic turmoil as a result of the Russian invasion of Ukraine has had a dramatic impact on capital and commodity markets, launching a new wave of disruptions to businesses. Furthermore, the start of a new Fed tightening cycle will likely weigh on economic activity. The outlook has become highly uncertain.

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