February 25, 2021
Initial unemployment claims for the week of February 20 declined by 111 thousand to 739thousand after having fallen 7 thousand in the previous week. After reaching a peak of 6,867 thousand at the end of March initial claims had been steadily declining. However, it appears that in mid-December the rapid spread of corona virus cases caused some states and cities to respond by enhancing restrictions and that is slowing the rate of improvement in the labor market.
The number of people receiving unemployment benefits fell 101 thousand in the week ending February 13 to 4,419 thousand after having declined 38 thousand in the previous week. While these are weekly data and can bounce around from week to week, the slower rate of decline in recent weeks suggests that the virus is slowing the rate of improvement in the labor market.. Prior to the recession roughly 1,725 thousand people were receiving benefits.
Given the drop in the number of people receiving unemployment benefits the insured unemployment rate fell 0.1% in the most recent week to 3.1% after having been unchanged in the previous week. Before the shutdown started it was steady at 1.2% so it is still high. This series reached a peak of 17.1% in the week of May 9. It had been declining quickly but its rate of declined has slowed in recent weeks.
The insured unemployment rate tracks closely the unemployment rate. Given the level of the insured unemployment rate we expect the unemployment rate to decline 0.2% in February to 6.1%.
The $900 billion fiscal stimulus bill boosted retail sales by 5.3% in January. Another fiscal stimulus bill of $1.7 trillion is working its way through Congress. The vaccines are being distributed and the pace of distribution is accelerating. And the rate of spread of the virus is showing signs of slowing rapidly. As a result, we expect GDP growth of 8.2% in the first quarter and 7.5% GDP growth for 2021.