Why are US jobless claims still high despite business reopenings?

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US Jobless Claims Remain Elevated Due to Continued Layoffs Amid Subdued Economic Activity and Worker Misclassification

Despite the reopening of businesses across the United States, initial jobless claims remain high, with another 1.54 million workers filing for unemployment benefits in the week ended June 6. This brings the total number of initial claims filed since mid-March to 44.2 million. While weekly claims have been declining from their peak, they still represent a level unseen since the Great Depression. The number of people receiving unemployment payments, while down from previous weeks, still stood at 20.9 million in the week ended May 30, indicating a substantial ongoing impact on the labor market.
Ongoing Layoffs Amid Restricted Business Operations

The primary driver for the continued high level of jobless claims is that, even with businesses reopening, economic activity remains restricted and subdued. This environment is leading to ongoing layoffs as companies adjust to reduced operational capacities and uncertain demand. Experts suggest that this situation will likely result in further layoffs in the coming weeks, contributing to the sustained high volume of initial claims.
Persistent High Levels of Continuing Claims

While initial claims have seen a steady decline, the total number of individuals receiving unemployment benefits, known as continuing claims, remains dramatically elevated compared to pre-pandemic levels. In the week ended May 30, 20.9 million people were still receiving payments, a figure significantly higher than the 1.7 million average prior to the health crisis. This indicates that a large segment of the workforce is still unemployed and relying on benefits.
Impact of Worker Misclassification on Official Rates

The official unemployment figures may not fully represent the extent of job losses due to a phenomenon known as worker misclassification. The Bureau of Labor Statistics indicated that the actual jobless rate was likely three percentage points higher for both April and May. This is because a number of workers were incorrectly classified as employed when they had, in fact, been laid off. This underreporting means the true scope of unemployment could be even greater than the published statistics suggest.
Unprecedented Unemployment Rate Levels

The current unemployment situation, despite the recent job gains and declining initial claims, is still exceptionally severe. The overall unemployment rate, even with the reported decline to 13.3% in May from 14.7% in April, is at a level not seen in approximately 90 years, reminiscent of the Great Depression. Furthermore, the weekly jobless claims, while decreasing, remain higher than any single week recorded during the 2008 global financial crisis, underscoring the profound impact of the current economic downturn.

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Why are US jobless claims still high despite business reopenings?

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