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Fannie Mae Chief Economist Offers Insights on Unemployment Report

Doug Duncan, Chief Economist at Fannie Mae, shared his perspective on last week’s unemployment figures.

Initial claims for unemployment insurance were 2.1 million for the reporting week (May 23), a drop of 300,000 from the previous week. “While the initial claims figure continues to trend downward from a peak of 6.9 million on March 28, claims still remain at historically elevated levels and continue to illustrate the unprecedented degree of labor market disruption being registered via reduced economic activity and falling consumer confidence due to the ongoing COVID-19 outbreak,” he said. “Over the last 10 weeks, close to 41 million unemployment insurance claims have been filed, representing 27 percent of the workforce, as measured by the level of payroll employment in the February employment report.

Continued claims, also known as insured unemployment, fell from the all-time high set last week. They fell to 21 million for the week ending May 16 (this number is reported with a one-week lag relative to initial claims). “While it is encouraging to see continued claims fall for the first time since the current crisis began, this number still represents close to 14% of the workforce. Continued claims represent the cumulative number of persons claiming unemployment insurance benefits at a point in time and is therefore a better, though still imperfect, measure of the total extent of joblessness present in the economy.”

As of May 9, states reported processing 8 million continued claims for benefits available from emergency compensation programs enacted as part of the CARES Act. Duncan notes that this 8 million figure is not already included in the regular continued claims number. These expanded programs provide benefits to persons normally ineligible for unemployment insurance or who have exhausted regular benefits.

For the week ending May 9, the states with the highest insured unemployment rates were:

  • Washington (31.2%)
  • Nevada (26.7%)
  • Florida (25%)
  • Hawaii (23.4%)

“The national figure for the corresponding week was 17.1%. The insured unemployment rate represents the fraction of the unemployment insurance-eligible workforce currently receiving benefits,” Duncan says. “For the week ending May 16, California and Florida showed the biggest declines in continued claims, falling 1.4 million and 1.6 million, respectively, from the prior week. (State data for the week ending May 16 should be considered preliminary estimates due to the way these data are collected)

Duncan says that as with the prior weeks, a few caveats make this week’s data difficult to interpret precisely. “On one hand, unemployment insurance eligibility rules have been relaxed recently, increasing the number of people who are able to apply. This makes it difficult to estimate the uninsured unemployed share of the workforce. On the other hand, many states reported a significant backlog of unemployment insurance applications due to a lack of processing capacity, indicating that this week’s release may understate the true extent of insured layoffs.”

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