Another 885,000 Americans filed for unemployment benefits for the first time last week, the highest level in three months as new restrictions to combat the resurgence of coronavirus cases continue to weigh on the job market.
Weekly unemployment claims rose by 23,000 from 862,000 last week. Economists had expected the claims to moderate to 800,000. This went hand in hand with a rise in government unemployment benefit (PUA) applications by 40,000 to 455,037, the US Department of Labor said on Thursday.
"To put these numbers in perspective, the highest single weekly count before the 1982 pandemic broke out was 695,000," said Joshua Shapiro, an economist at the consulting firm Maria Fiorini Ramirez. The fact that claims "are still running at such a high level is bad news in absolute terms," he added.
As of December 5, 5.51 million Americans were actively collecting government unemployment benefits, down from 273,000 a week earlier. Economists warned that this could be due to the exhaustion of some unemployed workers' benefits rather than finding new work.
While the weekly numbers can be volatile during the holidays, the number of claims remains increased. Approximately 20.65 million people are receiving unemployment benefits nine months after the coronavirus crisis began in the United States.
A resurgence of coronavirus cases and new restrictions imposed by some states have hampered labor market recovery and weighed on the US economy as a whole. The US only created 245,000 jobs in November and the unemployment rate is 6.7 percent. Retail sales last month declined the most in seven months at the start of the holiday shopping season, raising fears that consumer spending was slowing.
Officials hope that Covid-19 vaccines, which have been administered in the US since this week, will help put the economy on a firmer footing. Still, it can take months for the bumps to spread widely.
By then, the burden of propping up the economy will have fallen on the Federal Reserve and Congress. The Fed on Wednesday pledged to continue buying debt until "significant further progress" was made in the recovery, but its actions fell short of expectations for more forceful action. Fed chairman Jay Powell reiterated the need for fiscal stimulus to more effectively support the economy in the months ahead.
Congress leaders are working towards a $ 900 billion stimulus package. A number of relief measures, including benefits for self-employed and gig workers, expire later this month – just as government restrictions are expected to tighten the labor market.
The disappointing unemployment figures increase the pressure on the legislature to find a solution soon. Among other things, Republicans want to cut federal unemployment benefits to make way for a new round of economic reviews while Democrats fight for both.
Approximately 14 million unemployed Americans who receive aid from federal programs established this year – the PUA and Pandemic Emergency Unemployment Compensation programs, which provide 13 weeks of federal benefits to people who have exhausted state aid – will receive these benefits by Lose end of year unless Washington acts.
"The recovery in the labor market was going well ahead of this recent surge in Covid cases, which has resulted in a significant deterioration," said Thomas Simons, Jefferies economist. "Because of this, it is important that Congress allocate additional funding to help the unemployed until the vaccine is more widely used."
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