Surprise! Weekly jobless claims below 900K for first time in pandemic

The latest installment of our weekly good news/bad news look at the American economy has more of the former in the metrics — while perhaps more of the latter in the future. The Department of Labor reported that initial jobless claims came in at 881,000 for the week ending August 29, the first time since the start of the pandemics and shutdowns that it has fallen below 900,000, and only the second time it has fallen below one million. The drop of over 100,000 new claims overcame a small upward revision last week of five thousand, and the new four-week average is now below a million new claims.

That’s not the only good news in the report, either. More than a million workers came off state-paid benefits rolls, suggesting that the expiration of government support programs at the beginning of the month didn’t do much to damage the jobs recovery under way since May (emphases mine):

In the week ending August 29, the advance figure for seasonally adjusted initial claims was 881,000, a decrease of 130,000 from the previous week’s revised level. The previous week’s level was revised up by 5,000 from 1,006,000 to 1,011,000. The 4-week moving average was 991,750, a decrease of 77,500 from the previous week’s revised average. The previous week’s average was revised up by 1,250 from 1,068,000 to 1,069,250.

The advance seasonally adjusted insured unemployment rate was 9.1 percent for the week ending August 22, a decrease of 0.8 percentage point from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending August 22 was 13,254,000, a decrease of 1,238,000 from the previous week’s revised level. The previous week’s level was revised down by 43,000 from 14,535,000 to 14,492,000. The 4-week moving average was 14,496,250, a decrease of 709,000 from the previous week’s revised average. The previous week’s average was revised down by 10,500 from 15,215,750 to 15,205,250.

Both lines have trended downward significantly for the last three months, while still remaining far too high in terms of normalcy. No one will argue that thirteen million Americans on unemployment benefits is a good level, but it’s a lot better than the 21-million figure from mid-June. That is a massive return to work, and a sign that employers are finding ways to get closer to normal operations.

That doesn’t mean that some employers are not finding those ways, as the AP reminds us as well. The AP compares the numbers to the same period last year, which misses the point:

The number of laid-off Americans applying for unemployment benefits fell to roughly 880,000 last week, a sign of possible improvement but evidence that the viral pandemic keeps forcing many businesses to slash jobs.

The latest figures, released Thursday by the Labor Department, suggest that nearly six months after the eruption of the coronavirus, the economy is still struggling to sustain a recovery and rebuild a job market that was devastated by the recession. In the previous week, more than 1 million had sought jobless aid.

All told, the government said that 13.3 million people are continuing to receive traditional jobless benefits, up from 1.7 million a year ago.

A year ago, state and local governments weren’t preventing people from engaging in commerce, either. This is a unique and (hopefully) limited crisis. The proper comparison is to other points within the crisis, and to mark whether we are improving on these metrics or falling further behind.

CNBC’s Rick Santelli has a better grasp of the situation:

The big impact from this continued improvement will likely hit Congress hardest. Democrats have held up a second round of stimulus and more employer support in order to trade it for aid to state and local governments. They counted on the expiration of the CARES Act to create an economic reversal that would force Republicans to sign onto another multi-trillion-dollar bill on Nancy Pelosi’s terms. Instead, the recovery seems to be keeping the same pace as before without government intervention, which makes Democrats’ leverage on Phase 4 all but evaporated.

And that’s just as well, Cato’s Chris Edwards wrote on Tuesday, because state and local governments don’t actually need the bailout anyway:

The BEA released data on state‐​local finances last week (Table 3.3). The chart below shows seasonally adjusted first and second quarter revenues for state‐​local governments, thus it roughly shows revenues before the recession (January‐​March) and during the recession (April‐​June). The BEA publishes its data annualized, so I divided the numbers by four.

From the first to the second quarter, sales and excise tax revenues fell 6 percent, property tax revenues rose 1 percent, and income tax revenues fell 2 percent. Overall state‐​local tax revenues fell 3 percent. State‐​local governments face challenges, and it is unknown how long the economy will take to recover, but a 3 percent tax revenue decline thus far is not a crisis.

While tax revenues have dipped slightly, federal aid to state‐​local governments has soared. Total tax revenues fell $13 billion from the first to the second quarter. But federal aid rose $192 billion as cash from federal relief bills filled state‐​local coffers. Total state‐​local revenues (from federal aid, taxes, and other sources) rose from $716 billion in the first quarter to $893 billion in the second quarter.

State‐​local governments are not short of money in general, although some particular jurisdictions may be hard hit. Federal aid has risen far more than tax revenues have fallen. State‐​local budgeting will be tougher in coming months than during the boom years, but the narrative that state‐​local services such as schools will collapse without more bailouts is false.

Senate Republicans plan to push a “skinny” aid bill this week or next that sends a much smaller amount to state and local governments, and only for specific COVID-19 programs, along with renewals for the employer-support programs and the second round of stimulus payments. Democrats are accusing Republicans of stinginess, but having lost their August bet, they may have no choice but to agree to a compromise that takes bloc-grants off the table, perhaps in exchange for a withdrawal of the liability protections Republicans wanted.

Tomorrow’s jobs report from the Bureau of Labor Statistics should look pretty solid, based on this data. If it comes in at a million or more jobs added in August, Democrats will have no leg on which to stand to pursue another massive bailout package.

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