Here are 3 things to know about unemployment claims

On Jan 20, 2022

A job seeker receives information from a recruiter during a job fair in Miami, Florida, on Dec. 16, 2021.

Eva Marie Uzcategui/Bloomberg via Getty Images

The number of people filing for unemployment benefits jumped last week to the highest level since October, the Labor Department said Thursday.

That may signal a troubling rebound, after claims hit recent lows unseen in over 50 years. But the one-week bump may not portend an ugly trend for the labor market, according to economists.

Here’s what to know.

Omicron

A recent surge in Covid cases, fueled by the highly contagious omicron variant, likely contributed to the spike in claims last week, economists said. But the extent of that impact is unclear.

Average daily U.S. Covid cases hit a recent peak of almost 798,000 on Jan. 15 — nearly double the tally from the beginning of the year and roughly eight times that of early December, according to Centers for Disease Control and Prevention data.

Meanwhile, initial claims for unemployment benefits (a proxy for applications) hit 286,000 the week ended Jan. 15, according to the Labor Department. That’s an increase of 55,000, or 24%, from the prior week.

A decline in consumer demand amid rising caseloads may have led businesses to furlough workers. Others may have shut their doors temporarily if too many staff members were ill or exposed to the virus.

“People are losing paychecks to omicron,” Diane Swonk, the chief economist at Grant Thornton, said in a tweet. “The losses are large enough to apply for [unemployment insurance], which means layoffs being triggered by workers out ill and people’s fear of contagion.”

About 8.8 million workers said they were out sick with the virus or caring for an ill family member between Dec. 29 and Jan. 10 — a pandemic-era record, according to federal data.

(A quirk in unemployment rules disallows benefits for workers who test positive for Covid; but someone who’s exposed or who loses hours due to a business shutdown may be eligible.)

However, elevated caseloads likely aren’t the only factor at play, according to economists.

Seasonal swings

January is normally a volatile time of year for jobless claims.

That’s largely due to seasonal labor patterns — layoffs of temporary holiday workers, construction projects affected by winter weather, people delaying a claim for benefits until after the holidays are over.

“It’s pretty normal to see a spike in claims in January,” according to Daniel Zhao, a senior economist at the career site Glassdoor.

The Labor Department adjusts its weekly unemployment data to account for these seasonal patterns. But pandemic-era distortions to the labor market make it more difficult to control for those factors.

“Seasonality in the best of times can be tricky to interpret, especially during a pandemic when everything is upside down and…