Unemployment claims drop to lowest ahead of elections

New filings for unemployment claims dropped to 787,700, last week, the lowest since March 14. Continuing claims also dropped more than 1 million.

According to a Dow Jones economists' survey, unemployment claims for the week ending October 17 was expected to be 875,000. Thus, there was a significant difference of 73,000 from the previous week which was 842,000.

The decline in weekly unemployment claims has shown that there is progress, but the numbers still exceed the levels in previous recessions and economic declines. While the numbers may have fallen by half, people still receiving unemployment benefits in the U.S. are altogether more than 23 million.

“Some recovery is better than no recovery, but we want this to be stronger,” said Ernie Tedeschi, managing director and policy economists at Evercore ISI. “It’s at risk of getting knocked off its slow momentum if we get another shock, another wave of the virus.”

The last time weekly unemployment claims fell below one million was on March 14 at 282,000, just before the wave of the coronavirus hit the U.S., forcing millions of Americans into unemployment.

With a new stimulus package yet to be passed and a coronavirus vaccine yet to be developed, millions of Americans are still out of work. However, the dramatic drop in unemployment claims can be linked to the migration of beneficiaries who have exhausted their regular benefits, to the Pandemic Unemployment Assistance emergency compensation program.

The total number of recipients under the emergency compensation program increased by 509,828 to 3.3 million, in the week that ended October 3. Recipients will be given an extra 13 weeks of compensation after they exhaust their benefits in the initial 26 weeks of eligibility.

There has also been progress in the decline of continuing claims as the numbers dropped by 1.2 million from the previous two weeks.

“We’re happy to see continuing claims fall, but the decline – even allowing for the PEUC/extended benefits effect – does not map one-to-one onto rising payrolls,” said Pantheon Macroeconomics’ chief economist Ian Shepherdson. “Some people no longer claiming benefits may have dropped out of the labor force, while some might have taken non-payroll gig or freelance jobs. Moreover, continuing claims lag initial claims, so if initial claims start rising again, continuing claims will follow.”

Chief U.S. financial economist at Oxford Economics said the unemployment claims are still very high, and “the lack of continuing fiscal aid for the unemployed is going to weigh on consumer attitudes and consumer spending.” Adding that it is a painful reality for households that are depending on the stimulus package.