After several red state governors tightened unemployment benefits, job reports reflecting May of 2021 showed that initial jobless claims for the last week in May dropped 20,000 from the adjusted 405,000 for the previous week to 385,000.
The number is the lowest since 225,000 for the week ending March 14, 2020, just as pandemic lockdowns began to happen around the U.S.
The number of claims for Pandemic Unemployment Assistance, which comes into play for those not eligible for regular unemployment insurance, also fell more than 17,000 from the previous week, to 76,098.
Jobless claims have been falling through 2021, which makes sense as the number of open positions in the U.S. hit 8.1 million in March. Many businesses have had difficulty finding workers in recent months as unemployment has been extended by the federal government through September and boosted $300 per week above the usual amount paid.
More people may be motivated to look for jobs as 25 states have said they will end the federal unemployment boost earlier than September, and many states, led by red state governors like Ron DeSantis, have re-instituted requirements that recipents actively look for work, requirements that were suspended during the pandemic.
Most states also penalize recipents that refuse jobs offered to them, which could lead to loss of benefits.
Payroll company ADP reported that 978,000 new private sector jobs were added to the economy in May, which is higher than the 680,000 expected by economists. Previous reports by ADP were inflated, however, compared to the Labor Department’s official numbers.
Biden and the Democrats were hoping for a positive jobs report to bolster their view that extended unemployment was not holding back the recovery.
Inflation is the wild card
It remains to be seen whether the economic recovery will slow if inflation remains higher than expected and stimulus payments are spent.
Inflation rose to a 13-year high of 4.2% in April, and higher prices on food, gas and construction materials don’t bode well for at least several months. Lingering supply chain disruptions have also led to higher prices as demand exceeds supply in those areas.
New and used car prices have also risen because of the worldwide microchip shortage, which has limited inventory of new cars.
All the economic recovery in the world is not going to lead to a healthy economy if the U.S. can’t rein in inflation soon, and the prospects of doing so are not looking good.