June 12th, 2020
U.S. Initial Unemployment Claims Continue to Fall; Big Obstacles Still Lie Ahead
According to the Labor Department, the number of people seeking unemployment benefits declined to 1.5 million (week ended June 6). This marks the tenth consecutive week of declining claims.
The number of Americans currently receiving unemployment benefits appears to have stabilized, totaling 20.9 million (week ended May 30). However, “continuing claims” remain at a historic level, 14.3 million above the previous record in 2009.
The U.S. labor market snapped back to life in May, as the unemployment rate dropped to 13.3 percent from April’s 14.7 percent and the total nonfarm payroll employment increased by 2.5 million. This is the highest number of payrolls added in a single month since 1948.
The US Bureau of Labor Statistics says the economic activities in the U.S. that were curtailed in March and April, due to Coronavirus, have now resumed. However, the resumption is partial, as only certain sectors are showing sharp growth in sales and employment rates. So it’s too early to claim complete recovery, as the jobless rate remains four times higher than February 2020.
Despite the recent gains, economists forecast a slow and irregular recovery. Government aid programs for businesses and households, which have driven trillions of dollars into the economy, are set to expire this summer. Many consumers and workers continue to be concerned about contracting the virus and prefer staying at home. The employment impact of pandemic-related safety regulations has yet to be realized and there is still potential for a second wave of the virus to resurface this fall.
Historically, unemployment numbers are a leading indicator of mortgage default rates, which in turn, drive many consumers into bankruptcy. AIS will keep monitoring job rates and other economic trends to help lenders and loan servicers better understand how to prepare for and manage a potential surge in bankruptcy filings later this year and into 2021.