A Most Remarkable Number!

By: Dr. M. Ray Perryman
Published in syndication December 15, 2021

It is no exaggeration to say that I have seen millions of numbers every week since the late 1970s (comments regarding my social life are neither encouraged nor welcomed). On those rare occasions when one startles me, I can't help but mention it.

Initial claims for unemployment fell to 184,000 for the week ending December 4, down 43,000 from the prior week. At least two things about this number are remarkable. First, it hasn't been this low in 52 years. Second, it happened less than two years after the depths of the COVID-19-related downturn pushed the number above six million, almost ten times the highest value ever prior to 2020. Moreover, initial claims remained above the pre-pandemic record for over a year.

By way of background, initial claims for unemployment essentially represent layoffs or jobs that have recently been eliminated. The series is somewhat volatile and is usually only the province of geeks and nerds (the admonition above still applies). Of late, however, it has been a weekly barometer of the economy amidst the pandemic uncertainty. The last time initial claims were this low was September 6, 1969 (the height of the long Vietnam era expansion when the workforce was much smaller). The four-week moving average has also fallen below pre-pandemic levels.

There are always some initial claims arising from the inevitable friction in a multi-trillion-dollar machine. Through 2019, they were typically in the 210,000 to 220,000 range. Then came the pandemic. Claims soared to 6.1 million for the week of April 4, 2020. Before that time, the highest numbers ever seen were 695,000 at the nadir of the 1980s downturn and 665,000 in 2009 during the Great Recession. The labor market had never experienced anything like it, and the disruptions to individuals and families were extreme.

To fall back down to a historic low level only 20 months later is nothing short of astounding. I vividly recall noting the milestone of going below 700,000 claims this spring with considerable relief.

In addition to greater opportunities as the economy improves, labor shortages are also in play. With fierce competition for workers, a variety of incentives (such as higher pay, greater flexibility, and signing bonuses) are becoming increasingly common. In this environment, companies have a greater incentive to retain jobs due to the difficulty in finding replacements.

Before the pandemic, the US economy was enjoying a historic expansion of some 11 years. While things weren't perfect, the growth showed no real signs of dissipating. As the health crisis has subsided, jobs have returned. Assuming we can avoid a major surge in serious COVID-19 cases, we'll continue to experience a very tight labor market for quite a while. Stay safe!