The number of Americans filing first-time applications for unemployment benefits surged last week, confirming a weakening in labour market conditions as a worsening COVID-19 pandemic disrupts operations at restaurants and other businesses.
Initial claims for state unemployment benefits totalled a seasonally adjusted 965,000 for the week ended Jan. 9, compared to 784,000 in the prior week, the U.S. Labour Department said on Thursday. Economists polled by Reuters had forecast 795,000 applications in the latest week.
It’s the highest number since late August. Applications declined over the summer but have been stuck above 700,000 since September.
Claims were also likely lifted by re-applications for benefits following the government’s renewal of a $300 US unemployment supplement until March 14 as part of nearly $900 billion in additional relief approved at the end of December.
Government-funded programs for the self-employed, gig workers and others who do not qualify for the state unemployment programs as well as those who have exhausted their benefits were also extended.
Authorities in many states have banned indoor dining to slow the spread of the coronavirus. The economy shed jobs in December for the first time in eight months.
The Federal Reserve’s Beige Book report of anecdotal information on business activity collected from contacts nationwide in early January showed on Wednesday that “contacts in the leisure and hospitality sectors reported renewed employment cuts due to stricter containment measures.”
The central bank also noted that the resurgence in the coronavirus was causing staff shortages in the manufacturing, construction and transportation sectors.
Most infections of any country
The virus has infected more than 22.5 million people in the United States and killed over 376,188, the most of any country. More than 4,300 deaths were reported Tuesday, a record high.
Though jobless claims have dropped from a record 6.867 million in March, they remain above their 665,000 peak during the 2007-09 Great Recession. Economists say it could take several years for the labour market to recover from the pandemic.
“While prospects for the economy later in 2021 are upbeat, the labour market recovery has taken a step backward,” said Nancy Vanden Houten, an economist at Oxford Economics, “and we expect claims to remain elevated, with the risk that they rise from last week’s levels.”
Last week’s applications for aid might have been elevated in part because state employment offices had been closed over the holidays, requiring some jobless people to wait until last week to apply.
5.3 million Americans receiving jobless benefits
In addition to last week’s first-time applications for unemployment aid, the government said Thursday that 5.3 million Americans are continuing to receive state jobless benefits, up from 5.1 million in the previous week. It suggests that fewer people who are out of work are finding jobs.
About 11.6 million people received jobless aid from two federal programs in the week that ended Dec. 26, the latest period for which data is available. One of those programs provides extended benefits to people who have exhausted their state aid. The other supplies benefits to self-employed and contract workers.
Those two programs had expired near the end of December. They were belatedly renewed, through mid-March, in the $900-billion rescue aid package that Congress approved and President Donald Trump signed into law. That legislation also included $600 relief cheques for most adults and a supplemental unemployment benefit payment of $300 a week. Congressional Democrats favour boosting the cheques to $2,000 and extending federal aid beyond March, as does president-elect Joe Biden.
The U.S. job market’s weakness was made painfully clear in the December employment report that the government issued last week. Employers shed jobs for the first time since April as the pandemic tightened its grip on consumers and businesses.
The figures also depicted a sharply uneven job market: The losses last month were concentrated among restaurants, bars, hotels and entertainment venues. Educational services, mostly colleges and universities, also cut workers in December. So did film and music studios.
Most other large industries, though, reported job gains. Many economists had expected last spring that job losses would spread to more industries. Though all sectors of the economy initially laid off workers, most of them have avoided deep job cuts. Manufacturing, construction, and professional services like engineering and architecture, for example, all added jobs in December.
At the same time, many companies seem reluctant to sharply ramp up hiring. A government report Tuesday showed that employers advertised fewer open jobs in November than in October. The decline, while small, was widespread across most industries.