Surge of New Unemployment Claims Growth in the US Holds Labor Market Recovery
The number of Americans filing new claims for unemployment benefits unexpectedly surged to 1 million last week, darkening the prospects for a recovery in the American labor market, hit by the coronavirus pandemic.
However, it does indicate that a re-hiring process is underway. The number of those continuing to receive unemployment benefits is slowly declining, the Labor Department said Thursday, and other data indicate recovery from the COVID-19 recession continues, albeit at a slower pace..
Initial claims for state unemployment benefits rose to a seasonally adjusted 1.106 million for the week ending August 15, from an upwardly revised 971,000 the previous week. Economists polled by Reuters predicted 925,000 filings.
The level of the previous week was the first since March this year that there were less than 1 million new applications, and gave some optimism about the further slowdown in the rate of layoffs. Last week’s reversal messed up this situation, and the number of new weekly orders has been above the 1 million mark in 21 of the last 22 weeks..
«The labor market is far from health», – wrote in a note to clients Nancy Vanden Houten, Lead US Economist at Oxford Economics.
The instability in the payment of benefits is associated with the termination of the payment of additional weekly unemployment benefits in the amount of $ 600 at the end of July. The extended benefits have been in effect since spring as part of a massive coronavirus stimulus package passed by Congress in late March, but Democrats in Congress and the White House have been unable to agree to extend it..
Although the president Donald Trump signed a decree that includes a provision to extend the copayment at a reduced rate to $ 400 per week, implementation is causing confusion.
U.S. states are required to cover $ 100 in benefits, but many governors have indicated they lack the financial capacity after their incomes were cut as a result of the fight against the COVID-19 pandemic. The remaining $ 300 will be funded by a limited disaster relief program, which economists estimate could be exhausted as early as September.
U.S. jobless claims rise as 885,000 file for first-time unemployment
Vanden Houten of Oxford notes that only seven states have received approval for additional benefits.
New COVID-19 infections continue to spread throughout the country, forcing authorities in some of the hardest hit areas to either close or suspend reopening of factories. The newest twist on the path to igniting the outbreak includes the formation of new outbreaks associated with the fact that some colleges are reopening their campuses.
At the end of March, the number of initial applications reached a record level of 6.867 million.
«Compared to the last full week of July, the number of applications still decreased by 325,000», – Jefferies economists said in a note to clients, describing overall growth as «disappointing».
«The next few weeks will show how fundamental the recent improvement has been as "Sun Belt" (Sun Belt, Southern US) Recovers From COVID-19 Surge, Or Tech As $ 600 Expired», – said economists to Jefferies.
While the number of new applications is on the rise, the number of people continuing to receive unemployment benefits has dropped to its lowest level since April. So-called ongoing requests were down to $ 14.844 million in the week ending Aug. 8, from a revised $ 15.480 million in the previous week. Economists polled by Reuters predicted 15 million repeat applications.
Including those participating in the pandemic unemployment assistance program, which provides benefits to those who are unemployed and generally not eligible for standard government unemployment benefits, the total number of people who received assistance was 28.06 million. the week ending August 1, which is about 200,000 less than the previous week.
Only 9.3 million of the 22 million jobs lost between February and April have been recovered so far, and the economy experienced its biggest recession since the end of World War II in the second quarter, down nearly 33% year on year..
However, two other reports on Thursday showed the recovery is well under way, although the pace has slowed in recent weeks..
Philadelphia Manufacturing Base Index Shows Mid-Atlantic Activity Growth Slow For Second Consecutive Month In August.
The Philadelphia Federal Reserve’s PMI fell to 17.2 from 24.1 in July. A value above zero indicates expansion.
The Conference Board’s Leading Economic Index (LEI) rose 1.4% in July after rising 3.0% and 3.1% in June and May, respectively.
«Despite recent gains in key economic indicators, which remain encouraging enough, the initial recovery from the pandemic appears to be waning.», – said Ataman Ozyildirim, Senior Director of Economic Research at the Conference Board. «LEI Shows Economic Growth To Fall Significantly In The Final Months Of 2020».