The Latest Unemployment Report Does Not Inspire Confidence

Unite Here! union members circle around the US Capitol during a car caravan for racial and economic justice on June 17, 2020 in Washington, DC. - Labor organizations called for car caravan demonstrations across the US to protest record unemployment and continued racial injustice. (Photo by Olivier DOULIERY / AFP) (Photo by OLIVIER DOULIERY/AFP via Getty Images)
Totally reasonable sentiment at this point. OLIVIER DOULIERY/Getty Images

The latest round of unemployment claims should probably put a damper on anybody’s hopes that the economy is about to come roaring back to life from its coronavirus-induced coma. With seasonal adjustments, 1.5 million Americans filed for jobless benefits last week, suggesting that the crisis is still taking a toll on employers. Meanwhile, the overall share of the workforce claiming unemployment insurance seems to have stalled out, sitting at 14.1 percent for the second week in a row, and little changed since the middle of May.

Insured Unemployment Rate
Federal Reserve Bank of St. Louis

Even if you strip out the statistical adjustments that are meant to account for seasonal factors, which might be skewing the overall data a bit right now because of the historically unprecedented moment we’re in, the graph tells the same basic story.

Insured unemployment rate
Federal Reserve Bank of St. Louis

Anyway, more than 20 million people are still claiming normal unemployment benefits. If you add in federal programs, more than 29 million were claiming them as of the week ending May 30, the most recent window for which we have comprehensive data. Not great, Bob!

We don’t know exactly why the these numbers aren’t improving faster, but there are two likely possibilities—one for optimists and one for pessimists. The (barely) glass-half-full scenario is that states are just working their way through a large backlog of old applications. If that’s the case, it’s possible that lots of people are actually going back to work, but the unemployment rolls are staying steady because many Americans who lost their jobs a long time ago are only just now getting their applications processed and receiving benefits. The glass-half-empty scenario is that a lot of people are still losing their jobs because the economy is only kind of semi-functioning with social distancing still in place and a deadly virus still raging. If that’s the case, then the overall unemployment rate probably isn’t falling much either.

If I had to bet, I’d wager on the glass-half-empty scenario. Investors seem to be doing the same, given that stocks are falling on this news. These numbers do not inspire confidence.