Northwest Arkansas Democrat-Gazette
Lost-jobs aid filings notch rise to 885,000
Pandemic cutting economy deeper
New applications for state unemployment benefits unexpectedly jumped to the highest level in three months last week, suggesting the labor market’s recovery is faltering amid the surge in covid-19 cases and widening business restrictions.
Initial jobless claims in regular state programs rose by 23,000 to 885,000, Labor Department data showed Thursday.
The report showed that nine months after the virus paralyzed the economy, many employers are still slashing jobs as the pandemic forces more business restrictions and leads many consumers to stay home. The number of claims was much higher than the 800,000 that economists had expected.
Before the coronavirus lockdowns in March, weekly jobless claims had typically numbered about 225,000. The far- higher current pace reflects an employment market under stress and diminished job security for many.
Consumer caution, coupled with new restrictions on business activity like indoor dining, has pummeled the hospitality industry, lodging, airlines and other service businesses. The debut of a coronavirus vaccine this week offers the pros
pect of relief, but until mass inoculations begin next year, the economy will remain under pressure.
“Businesses are closing, and as a result, we are seeing job losses mount — and that’s exactly what we were fearful of going into the winter,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “It’s going to be a challenging few months, no doubt.”
With the outlook shaky, U.S. lawmakers are working out final details of a new relief package that would extend pandemic jobless aid, while the Federal Reserve on Wednesday pledged to maintain its extensive bond purchases until employment and inflation make “substantial further progress.”
U.S. stock futures pared gains after the report, while 10-year Treasury yields fell.
Continuing claims for state programs declined by 273,000 to 5.51 million in the week ending Dec. 5. That figure is down sharply from its peak of nearly 23 million in May. It roughly approximates the number of people receiving state unemployment benefits, but doesn’t include the millions of people who have already exhausted those benefits or are receiving assistance through federal pandemic jobless aid programs.
RECOVERY IN DANGER
With layoffs still elevated and new confirmed viral cases in the United States surging, the economy’s modest recovery is increasingly in danger.
“U.S. weekly jobless claims continue to head in the wrong direction,” Edward Moya, an analyst at the currency trading firm Oanda, wrote in a research note. “The labor market outlook is bleak as the winter wave of the virus is going to lead to more shutdowns.”
Many jobless Americans are now collecting checks under two federal programs that were created this year to ease the economic pain inflicted by the pandemic.
On top of regular state claims, about 455,000 initial claims for Pandemic Unemployment Assistance were filed last week. The program, which provides jobless benefits to those not typically eligible like the self-employed and gig workers, is set to expire later this month unless there’s congressional action. There were 9.24 million continuing claims for the assistance in the week ending Nov. 28, up about 689,000 from the week before.
In the same week, there were 4.8 million continuing claims for Pandemic Emergency Unemployment Compensation, the federal program that provides up to 13 additional weeks of benefits to those who have exhausted their regular state benefits. That program is also set to expire.
All told, 20.6 million people are now receiving some type of unemployment benefits. ( Figures for the two pandemic-related programs aren’t adjusted for seasonal variations.)
“We are not moving in the right direction,” said Gregory Daco, chief U.S. economist at Oxford Economics. “With the looming expiration of benefits, it’s even more worrisome.”
ECONOMIC NUMBERS
The pandemic has been an economic as well as a health disaster. In March and April, employers slashed 22 million jobs after the virus, and the measures meant to contain it brought normal business activity to a halt. The nation’s gross domestic product — the broadest measure of economic output — plummeted from April to June at a record annual rate of 31.4%.
The comeback started strong, boosted by a $2 trillion federal rescue package in March. But it has since lost momentum as confirmed covid-19 cases have surged, and Congress has thus far failed to enact further aid. Though gross domestic product expanded at a record annual rate of 33.1% from July-September, the annual pace of economic growth is thought to be slowing significantly in the current quarter — a slump that’s considered likely to extend into early next year.
The pace of job creation has also diminished steadily — from 4.8 million added jobs in June to 1.8 million in July, 1.5 million in August, 711,000 in September, 610,000 in October and 245,000 in November.
On Wednesday, the Commerce Department reported that retail sales skidded 1.1% in November, the biggest drop in seven months and a troubling sign at the start of the all-important holiday shopping season. Gus Faucher, chief economist at PNC Financial Services, expects economic growth to be weak for the next few months before picking up later in 2021.
The data firm Womply reports that 23% of local businesses were closed Dec. 1, up steadily from 17% at the start of August. Womply also found that 41% of all local bars are closed along with 28% of restaurants and 32% of hair salons and other health and beauty shops.
“Until we get a lot of people vaccinated, the economy will face a difficult test,” Faucher said. “I don’t know if we will see an outright contraction or the loss of jobs, but the pace of improvement will slow markedly.”