Layoffs are starting to decline in the United States. However, millions who lost their jobs because of the COVID-19 pandemic continue to draw unemployment benefits. This could mean that the labor market could take years to recover despite businesses resuming to hire workers.
Fox Business reported that the weekly jobless claims report from the Labor Department on Thursday will “follow news last Friday of a surprise 2.5 million increase in nonfarm payrolls in May. It could reinforce views that the labor market has weathered the worst of the turbulence.”
On Wednesday, the Federal Reserve signaled that it would give years of extraordinary support for the economy. This comes as policymakers project a 9.3% unemployment rate at year-end.
“The steady retreat in claims is a positive development, but the labor market has suffered a traumatic blow and a full recovery will be measured in years, not weeks or months,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
“The figures don’t capture the full extent of the blow dealt to workers during this unique crisis,” she added.
According to Reuters, while the number of people staying on benefits is easing, the ranks of unemployment are still large. “The number of people receiving benefits after an initial week of aid fell 339,000 to 20.929 million for the week ended May 30. The so-called continued claims, which are reported with a one-week lag, dropped from a record high of 24.912 million in early May,” said the report.
Fox Business explained that the government’s Paycheck Protection Program possibly caused the decline.
“We are seeing the labor market high on PPP money,” said Sung Won Sohn, a business economics professor at Loyola Marymount University in Los Angeles. “Once it runs out we might see a significant increase in layoffs again.”