September 16, 2021
Initial unemployment claims for the week of September 411 rose 20 thousand to 332 thousand after declining 33 thousand in the previous week. After reaching a peak of 6,867 thousand at the end of March of last year initial claims had been steadily declining. The much lower level of claims in recent weeks suggests a somewhat faster pace of descent is underway as the businesses and consumers continue to emerge from the recession. However, the most recent week was almost certainly inflated by Hurricane Ida which hit the Louisiana coast. The biggest increase in claims this week was in Louisiana. Clearly, the labor market continues to improve.
The number of people receiving unemployment benefits fell 187 thousand in the week ending September 4 to 2,665 thousand after rising 47 thousand in the previous week. This series continues to decline gradually. Prior to the recession roughly 1,725 thousand people were receiving benefits. It is still a bit high, but it is declining rapidly.
Given a big drop in the number of people receiving unemployment benefits the insured unemployment rate declined 0.2% in most recent week to 1.9% after having risen 0.1% in the previous week. Before the shutdown started it was steady at 1.2% so it is still high but it is declining steadily. This series reached a peak of 17.1% in the week of May 9. Its rate of declined has slowed in recent weeks but continues to decline by about 0.1% every week or two. It could be that some lower income workers are weighing their options and perhaps deciding to permanently leave their industry. That is an easy decision to make as long as somebody is paying you not to work. But when generous Federal unemployment benefits expire after Labor Day we will see if those people become much more willing to take a job. Perhaps this week’s drop is a reflection that this process is underway.
The insured unemployment rate tracks closely the unemployment rate. Given the level of the insured unemployment rate we expect the unemployment rate to decline 0.1% in September to 5.1%. We also expect payroll employment in increase by 700 thousand workers in September.
The fiscal stimulus money is pushing consumer spending and with the savings rate still at 9.6% the consumer has plenty of ammo to spend on whatever he or she wants for months to come. As a result, we expect to see 8.0% GDP growth in the third quarter, and 10.5% GDP growth for Q4,