Initial jobless claims surged by 965,000 for the week ending Jan. 9, which almost surely captures the 498,000 individuals in the leisure and hospitality sector who lost their jobs in December and the remarkable churn in the labor market amid lockdowns by state and local governments.
The data, even at its high level, sorely understates the long-term damage to the labor market.
The increase, reported by the Labor Department on Thursday, was most likely pushed higher by people applying for newly extended unemployment insurance programs. But that needs to be put in a broader context of historically elevated levels of unemployment and data that sorely understates the long-term damage to the labor market.
This data and that long-term damage to the labor market reaffirm the flexible average inflation target adopted by the Federal Reserve last year and imply that the central bank can maintain its accommodative monetary policies this year. In our estimation, the Fed can more than afford to wait until 2022 to start tapering operations and until 2024 to lift the policy rate.
Continuing claims rose by 271,000 to 5.271 million. When added to the surge in first-time claims, there are still 18.4 million individuals receiving some form of unemployment benefits, which occurred despite 940,499 individuals who most likely saw their benefits expire.
Despite those who make the case that all is well and that no additional aid is necessary, we think that this data affirms the necessity for another round of fiscal aid.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.