When COVID-19 arrived a year ago, the first clear sign of the pandemic’s severe economic impact was a dramatic increase in the number of initial claims for unemployment benefits.
Now, first-time claims nationwide have ebbed to the lowest level since last March. In the Rochester region, a similar decline has occurred.
This is good news, for sure, but questions remain. Among them: Does this mark the emergence of a sustained labor market recovery or a temporary rebound? And when will initial weekly claims fall to levels typical before the pandemic struck?
In the week ended March 20, jobless claims in the Rochester region totaled 2,164, the Labor Department reported last Thursday. The only week in the last year with fewer initial claims was the one ended Oct. 17, with 2,047.
U.S. unemployment claims last week fell to 684,000 from 781,000 the week before—the lowest weekly total since mid-March last year, before lockdowns caused a tidal wave of layoffs.
Throughout the pandemic, local jobless claims have followed the trends for the nation as a whole. When the weekly number across the country exploded a year ago, the Rochester-area total also soared, increasing from 806 in the second week of March to more than 25,000 in the seven-day period ended March 28.
Weekly initial claims in the Finger Lakes region remained near—and sometimes higher than—10,000 through late May, before declining to around 5,000. They continued downward through early November, but then rose again as the autumn COVID surge here and in many other U.S. regions brought a return of some lockdown rules that had been removed after the outbreak’s first wave ebbed.
At the end of January, after new daily COVID infections and deaths peaked, the downward trend in jobless claims resumed.
Compared with the same week a year ago, last week’s total of 2,164 claims represented a 56 percent drop. But measured against the final weekly report in 2020 before the pandemic triggered much bigger numbers, the week-ago tally was nearly 160 percent higher—showing the gap that still remains between here and “normal.”
Optimism about the U.S. economy has grown in recent weeks, driven by several factors. One is the ramping up of COVID vaccinations and data showing the shots are highly effective in preventing serious illness or death. Most economists believe a robust recovery can occur only after COVID is brought under control.
Another factor is enactment of the $1.9 trillion relief package that includes $1,400 direct payments for many Americans. This stimulus comes on top of the $900 billion package—including $600 direct payments to most Americans, along with expanded and extended unemployment benefits—that former President Donald Trump signed early this year.
In part due to the trillions of dollars in pandemic relief approved since last spring, aggregate personal savings in the U.S. has increased dramatically—to $3.9 trillion in January up from $1.4 trillion in February 2020, before the U.S. economy went into a tailspin. So, many Americans have money to spend once they believe it is safe to do so.
Combined, these factors could fuel an explosive recovery. On March 17, the Federal Reserve released an economic outlook projecting that the growth rate this year would be the fastest in four decades and that by the end of 2021 the jobless rate would decline to 4.5 percent from 6.2 percent now.
Tempering the optimism with a degree of caution seems prudent, however. The U.S. Census Bureau’s latest data shows that nearly 40 percent of small businesses think it will be six months or more before their operations return to pre-COVID levels. The latest Paychex | IHS Markit Business Employment Watch showed a slight decline in its Small Business Jobs Index.
And in a key retail benchmark, the year-over-year decline in Finger Lakes region sales tax collections for February increased to minus 9.8 percent from minus 5.7 percent in January.
The primary concern, though, remains the pandemic trendlines—and how they might be affected in coming weeks by the spread of SARS-CoV-2 variants and relaxed pandemic restrictions. After sharp declines in late January and early February, new daily infections have started to rise again. In Monroe County, after hitting a low of 1.1 percent on Feb. 25, the seven-day average of positive COVID tests has nearly doubled to 2.1 percent.
If another wave of the pandemic arrives in full force, all bets on the economic recovery are off.
Paul Ericson is Rochester Beacon executive editor.