US jobless claims jump by most since March

$900 billion aid package should provide some relief this quarter

Applications for US state unemployment benefits surged last week by the most since late March, pointing to persistent labour-market pain as coronavirus infections continue to soar and potentially adding to momentum for a larger federal stimulus plan.

Initial jobless claims in regular state programmes rose by 181,000 to 965,000 in the week ended January 9, according to Labour Department data yesterday that showed a broad number of states with large increases. Unadjusted claims shot up 231,335 to 1.15 million.

Continuing claims in state programmes — an approximation of the number of people receiving ongoing benefits — climbed by 199,000 to 5.27 million in the week ended January 2.

Third Covid wave

The restrictions imposed to combat the third Covid wave clearly have done great damage, but it’s not obvious that the incremental hit is still increasing,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note.

“Claims will drift sideways, more or less, over the next two to three months, before restrictions on the services sector can be gradually eased as vaccination brings herd immunity into sight.”

Jobless claims have exceeded 750,000 each week since virus cases started surging again late last year, underscoring the impact of infection fears and business restrictions on employment. Vaccine distribution should help restore economic activity in the coming months, but the first quarter could continue to bring labour market weakness until inoculations reach a critical mass.

Stimulus outlook

The recently approved $900 billion pandemic aid package should provide some relief for workers and businesses in the current quarter.

Enhanced unemployment benefits passed in the December

bill, combined with a $300 weekly top-up for regular state benefits, may have contributed to the latest increase in claims, said Gregory Daco, chief US economist at Oxford Economics.

“From a signalling perspective, once you see that maybe you think ‘it’s worth me filing because I can get an additional $X per week.’ There’s a positive effect there in terms of signalling, but I would not say it’s a revelation of additional laziness,” Daco said.

President-elect Joe Biden was expected to release details yesterday of a proposed additional relief package that could further extend unemployment benefits and aid cities and states. Biden last week put the “entire package” at “trillions of dollars,” and many Democrats believe it will be as much as $2 trillion, while others expect the coronavirus-only portion will fall closer to the value of the last package.

The initial filings far exceeded the worst days of the 200709 recession and may skew negotiators toward a bigger relief package.

Bloomberg A volunteer directs traffic at a drive-thru food distribution held by the Los Angeles Regional Food Bank in Baldwin Park, California, on Wednesday. Job losses, reduced wages, business closures and illness from Covid-19 are taking their toll on millions of Americans.