Initial Claims Fell, But Continuing Claims Stalled in mid-May

At the end of April, I posted Depression Versus Recovery in Employment.

At the peak of the 1980s recession, the worst recession since the 1930s, the 4-week moving average of initial claims peaked at 674,250. Adjusted for roughly 50 percent growth in the labor force takes the peak number to around 1 million job losses.

Initial claims have been falling and at the current pace, should fall below 1 million in one or two weeks. The past two weeks saw 1.8 million and 1.5 million initial claims. This must happen for any type of V-shape recovery, as well as the more optimistic recovery scenarios.

The other part of the puzzle is continuing claims. Are continuing claims falling faster than initial claims? This was true in early May, but it stalled in the latest reports.Continuing claims plateaued as initial claims offset rehiring.

Assuming the May employment report was mostly accurate, the final week in May likely saw a large drop in continuing claims as businesses rehired workers for the end of "Phase 1" lockdowns. Next week's initial claims report will reveal whether optimistic scenarios of a limited, pandemic-related recession are still in play or not. My cutoff for the optimistic scenarios is the Fed's forecast of a full recovery in GDP by the end of 2021.