July 22, 2021

Initial unemployment claims for the week of July 17 rose 51 thousand to 419 thousand after having fallen 18 thousand  in the previous week.  The July 10 level of 368 thousand was the lowest level of claims since March 14, 2020 when it was 256 thousand.   After reaching a peak of 6,867 thousand at the end of March of last year initial claims had been steadily declining.  Initial claims leveled off in December and the first three months of this year, but perhaps the much lower level of claims in recent weeks suggests a somewhat faster pace of descent  is underway as the number of corona virus cases shrinks dramatically, the slow but steady pace of vaccine distribution continues, and another round of stimulus checks has provided the consumer with plenty of ammo to spend.

The number of people receiving unemployment benefits declined 29 thousand in the week ending July 3 to, 3.236 thousand after having fallen 102 thousand in the previous week.  This is the lowest level for this series since March 21, 2020 when it was 3,094.  This series had been falling rapidly for months but its rate of descent has slowed in recent weeks.  Prior to the recession roughly 1,725 thousand people were receiving benefits.

Given a small decline  in the number of people receiving unemployment benefits  the insured unemployment rate was unchanged at 2.4% 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.  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.  That could happen even sooner because 25 states have already refused to accept the additional federal unemployment benefits so some of those people may return to work in the summer months.

The insured unemployment rate tracks closely  the unemployment rate.   Given the level of  the insured unemployment rate we expect the unemployment rate to decline 0.3% in July to 5.6%.  We also expect payroll employment in increase by 800 thousand workers in July.

The fiscal stimulus money is pushing consumer spending and with the savings rate still at 12.4% 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 9.0% growth in the second quarter, and 8.0% GDP growth for 2021.

Stephen Slifer


Charleston, SC