U.S. weekly jobless claims rise; COVID-19 surge seen slowing labor market healing

FILE PHOTO: People fill out application forms before a screening session for seasonal jobs at Coney Island in the Brooklyn borough of New York March 4, 2014. Photo Courtesy: Reuters

WASHINGTON (Reuters): The number of Americans filing first-time claims for jobless benefits unexpectedly rose last week, likely as new business restrictions to control spiraling COVID-19 infections unleashed a fresh wave of layoffs, which could further slow the labor market recovery.

The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed at least 20.3 million people on unemployment benefits at the end of October, seven months after the pandemic started in the United States.

Millions will lose benefits next month when two government-funded programs expire. President-elect Joe Biden will inherit the public health crisis and a frail economy when he takes over from President Donald Trump on Jan. 20.

Initial claims for state unemployment benefits increased 31,000 to a seasonally adjusted 742,000 for the week ended Nov. 14. Economists polled by Reuters had forecast 707,000 applications for the latest week.

Unadjusted claims rose 18,344 to 743,460 last week. Economists prefer the unadjusted number given earlier difficulties adjusting the claims data for seasonal fluctuations because of the economic shock caused by the pandemic. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs, 1.1 million people filed claims last week.

Daily new COVID-19 cases in the United States have been exceeding 100,000 since early this month, pushing the number of infections in the country above 11 million, according to a Reuters tally. Forty-one states have reported daily record increases in coronavirus infections and 20 have registered new all-time highs in coronavirus-related deaths from day to day. The death toll in the United States has surpassed 250,000.

Many jurisdictions have imposed restrictions on businesses to try to contain the spread of the virus.

Wall Street’s main indexes opened lower due to the soaring COVID-19 cases and rise in weekly jobless claims. The dollar .DXY rose against a basket of currencies. U.S. Treasury prices were higher.

Recovery Slowing
Unemployment claims dropped from a record 6.867 million in March as about 80% of the people temporarily laid off in March and April were rehired. That accounted for most of the rebound in job growth over the last six months.

Raging coronavirus infections and restrictions will weigh heavily on bars and restaurants as well as other businesses in the services sector that attract crowds.

The resurgence in COVID-19 cases coincides with the end of more than $3 trillion in government pandemic relief for businesses and workers, which helped to preserve jobs and lift the economy of the depths of the worst recession since the Great Depression.

In addition to a weekly unemployment subsidy, which has mostly expired, the government-funded program for people who do not qualify for regular state unemployment and another for those who have exhausted their six months of eligibility will lapse in December, creating what economists have called an income cliff.

Claims remain above their 665,000 peak during the 2007-2009 Great Recession. The claims data covered the period that the government surveyed businesses for the nonfarm payrolls portion of November’s employment report.

The government reported early this month that nonfarm payrolls increased by 638,000 jobs in October, the smallest gain since the jobs recovery started in May. That followed 672,000 jobs added in September. Only 12.1 million of the 22.2 million jobs lost in March and April have been recovered.

Though the claims report showed a decline in the number of people on unemployment rolls in early November, that was because many people have exhausted their eligibility for benefits, which are limited to six months in most states.

The number of people receiving benefits after an initial week of aid declined 429,000 to 6.372 million in the week ending Nov. 7. A record 4.377 million workers filed for extended unemployment benefits in the week ending Oct. 31, up 233,458 from the prior week. There were 20.3 million people collecting unemployment checks at the end of October under all programs.