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Economists foresee an unemployment "tsunami" coming

Data: U.S. Department of Labor; Chart: Andrew Witherspoon/Axios

The exponential growth of claims for the Pandemic Emergency Unemployment Compensation (PEUC) program are worrying economists and previewing a weakening U.S. labor market in the coming months.

What's happening: The PEUC is a CARES Act program for unemployed Americans who have exhausted the 26 weeks of unemployment benefits they get from their state. It has grown from 27,000 people on April 11 to 1.3 million as of Aug. 1.


Why it matters: The number of PEUC recipients has been over 1 million for four straight weeks and has increased each week. Worse, it's likely made up of people who lost their jobs before the wave of business closures that hit the U.S. in mid-March.

What we're hearing: "The real tsunami is coming," Mark Zandi, chief economist at Moody's Analytics, tells Axios. "My guess is at this point hiring in the industries that have been hit hard is going to abate."

  • "That leaves us with very little job creation in the rest of the economy but with still high levels of layoffs."
  • "I think the labor market is set to start weakening again here, particularly if Congress and the administration don’t get it together and pass more support."

What's next: "It becomes a longer tale of recovery with more labor market friction," says Julia Coronado, president of MacroPolicy Perspectives.

  • "You’re starting to see unemployment spells last a long time. The longer you’re out of the labor force and disconnected from your prior employer, the harder it is to reconnect."

The bottom line: "The recovery would be faster and more robust with the fiscal stimulus and there’s a lot more risk of a protracted, slower recovery and even some backtracking without it."

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