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A steady decline in jobless claims each week suggests the job market is starting to heal from the virus outbreak as states ease stay-at-home guidelines and allow more businesses to reopen, Goldman economists, led by Jan Hatzius, wrote in a note to clients on Sunday.
Since the nation's economy came to a grinding halt in mid-March, more than 40 million Americans lost their jobs, the Labor Department reported last week. Although the number of workers seeking assistance is still significantly higher than it was pre-crisis, jobless claims last week fell to the lowest amount since March 15. It was the eighth week in a row of declining claims.
Still, the economists cautioned that jobless claims numbers could send "mixed signals" about unemployment status in the country. As businesses start to rehire, continued claims -- which tracks the number of people who have already filed a claim and have been receiving benefits for at least two weeks -- could become a better gauge.
Although they initially expected unemployment to reach a high of 25 percent in June, real-time numbers suggested it actually peaked in May at about 21.5 percent.
"We continue to expect a fairly rapid decline in the second half, partly because most newly unemployed workers are on temporary rather than permanent layoff," the economist wrote. "However, Congress is likely to enact changes to the Paycheck Protection Program that look set to weaken rehiring incentives."
They are likely referring to the Paycheck Protection Program Flexibility Act, which the House passed last week in a nearly unanimous 417-1 vote.
The PPP, a centerpiece of the $2.2 trillion CARES Act signed into law at the end of March, provided forgivable loans of up to $10 million to businesses with fewer than 500 workers. In order for the loans to be forgiven, businesses have to adhere to strict requirements; however, the bill would ease some of those restrictions.
Loan recipients would only have to spend 60 percent of the aid on maintaining payroll — including salary, health insurance, leave and severance pay — rather than the current 75 percent rule (plus they would no longer have to rehire workers by June 30). The remaining 40 percent could go toward operating costs like rent and utilities.
Businesses would also have 24 weeks to spend the money instead of two months.
The Labor Department is slated to provide a comprehensive look at the outbreak’s impact on the labor market on Friday with the release of the May jobs report at 8:30 a.m. ET.