WASHINGTON: The number of Americans filing first-time claims for jobless benefits jumped to a near three-month high last week as mounting new COVID-19 infections led to more business restrictions, further evidence that the pandemic and lack of additional fiscal stimulus were hurting the economy.
The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy’s health, followed in the wake of data last week showing job gains in November were the smallest since the recovery started in May. Labor market distress is eroding demand, keeping inflation tame.
“Mass unemployment continues to weigh on economic growth and demand,” said Chris Rupkey, chief economist at MUFG in New York. “If Congress continues to sit on its hands without voting on a new relief package, the plight of the nation’s unemployed is going to grow darker by the hour.”
Initial claims for state unemployment benefits surged 137,000 to seasonally adjusted 853,000 for the week ended Dec. 5, the highest since mid-September. The weekly increase was the largest since March, when the nation was battered by the first wave of coronavirus infections. Economists polled by Reuters had forecast 725,000 applications in the latest week.
Unadjusted claims vaulted 228,982 to 947,504 last week. Economists prefer the unadjusted number because of earlier difficulties adjusting the claims data for seasonal fluctuations due to 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, 1.4 million people filed claims last week.
Jobless claims hit a record 6.867 million in March. They are above their 665,000 peak during the 2007-09 Great Recession.
The United States is in the throes of a fresh wave of coronavirus infections, with more than 15 million confirmed cases. Daily COVID-19 deaths reached 3,253 on Wednesday, boosting the U.S. total since the start of the pandemic to 289,740, with a record 106,219 people hospitalized.
New strict stay-at-home orders went into effect in California this week, affecting about three-quarters of the nearly 40 million people in the nation’s most populous state.
Other states and local governments have also imposed restrictions on businesses, which economists expect to lead to layoffs during winter, especially without additional pandemic relief money from the government.
A deal on another package remains elusive amid proposals and counterproposals. More than $3 trillion in government pandemic relief has helped millions of unemployed Americans cover daily expenses and companies keep workers on payrolls. The fiscal stimulus has almost dried up.
U.S. stocks were mixed. The dollar fell against a basket of currencies. U.S. Treasury prices rose.
DECLINE IN PAYROLLS?
While some of last week’s jump in jobless claims likely reflected the usual noise after last month’s Thanksgiving holiday, the increase was broadly in line with other labor market data that have suggested the recovery was ebbing after a burst of hiring during summer.
With COVID-19 infections raging, economists expect a decline in employment over winter, noting it would take a while to distribute vaccines. Independent data showed consumers are hunkering down at home.
“We need to be braced for a window of perhaps three or four months where restrictions will weigh on economic activity,” said James Knightley, chief international economist at ING in New York. “We see a growing probability that employment declines in coming months and not just in those sectors focusing on consumer service who are most likely to experience direct restrictions.”
The claims report also showed that people receiving benefits after an initial week of aid increased 230,000 to 5.757 million in the week ended Nov. 28. That was the first rise since August. The so-called continuing claims had declined, in part as people exhausted their eligibility for benefits, limited to 26 weeks in most states.
At least 4.533 million people were on extended benefits during the week ended Nov. 21. These benefits, which are funded by the government, are set to expire on Dec. 26 without a new package. About 19 million people were receiving benefits under all programs during that period. Long-term unemployment is becoming acute. Only 12.4 million of the 22.2 million jobs lost in March and April have been recovered.
In another report on Thursday, the Labor Department said its consumer price index rose 0.2% in November after being unchanged in October. But the trend remained soft. In the 12 months through November, the CPI increased 1.2% after a similar gain in October. Excluding the volatile food and energy components, the CPI also climbed 0.2% after being flat in October.
Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, was unchanged after rising 0.2%. Rent inflation has been tamed by forbearance agreements between tenants and landlords and a government moratorium on evictions.
In the 12 months through November, the so-called core CPI advanced 1.6%, matching October’s increase. Inflation is running below the Federal Reserve’s 2% target, a flexible average.
“Inflation will remain low in the near term … there are still huge swathes of excess capacity in many parts of the economy,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “With unemployment elevated, wage pressures are limited.”
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