U.S. Jobless Claims Rise to 1.1 Million in Latest Week

Latest data indicate layoffs remain elevated as labour market slowly improves

By guest author Eric Morath from Wall Street Journal

New applications for unemployment benefits rose last week after a series of declines, showing that the labor market’s recovery from the effects of the pandemic remains uneven.

Caption and graphics courtesy by Wall Street Journal

Weekly initial claims for jobless benefits rose by 135000 to a seasonally adjusted 1.1 million in the week that ended Aug. 15, the Labor Department said Thursday. The number of people collecting unemployment benefits through regular state programs, which cover most workers, decreased to about 14.8 million for the week ending Aug. 8. That marked the lowest number on benefit rolls since April.

Both figures remain higher than the worst such levels preceding the coronavirus pandemic, with the number of people receiving benefits more than double the 6.6 million reached in 2009.

“The labour market isn’t bouncing back—it’s clawing back in fits and starts,” said Michelle Holder, a labour economist at John Jay College in New York.

The number of new claims rising last week shows that fresh layoffs are occurring even as the economy broadly is showing signs of recovering from the deep economic downturn caused by the pandemic and the shutdowns aimed at curbing it.

Aerospace giant Boeing Co. said this week it plans more job cuts in response to a drop in jetliner demand that it expects to continue for at least three years. Clothing retailer Rent the Runway Inc. said last week it would permanently close its five retail locations, adding to a list of store closures during the health crisis. And many municipalities have warned of layoffs in response to falling tax revenues.

Maggie Brown, 24-years old, had a public relations job lined up this spring at New York City’s Metropolitan Museum of Art, but her start date was delayed until July. Then she was informed last month that her position was eliminated.

Ms. Brown, who previously worked as a freelance costume designer, is trying to sublease her apartment so she can move across the country to live with her parents in California. She said she was able to subsist with an extra USD 600-a-week federally funded payment that expired July 31, but without it her weekly unemployment benefit fell to USD 125 a week after taxes.

There is little costume design work with Broadway theaters closed, and because of limited seating, even bar and restaurant jobs are hard to find.

“I’m one of the lucky ones because at least I know I can move back in with my parents and they’ll support me,” the New York University graduate said. “But it’s still hard. The old adage is that if you can make it here, you can make it anywhere. I feel like I’ve failed.”

Thursday’s report showed a mixed picture of claims across states last week. Texas, Florida, Kansas, New Jersey and New York all had notable increases in applications. Meanwhile, California, Georgia, Nevada and Pennsylvania saw fewer applications.

Claims levels have moved up and down in recent weeks, ending what had been a consistent decline from a peak of nearly 7 million in late March to about 1 million in mid-July. The uneven pattern has played out similarly across states, and isn’t necessarily tied to the surges in coronavirus infections this summer in certain states, such as Florida and California, said Gus Faucher, economist at PNC Financial Services.

“Initially businesses were recalling a lot of workers as state restrictions were lifted,” he said. “Now businesses are dealing with the reality that there’s a lot lower demand than there was at the start of the year.”

Still, layoffs in recent months have been more than offset by businesses hiring and recalling old workers.

U.S. employers added nearly 9.3 million jobs in the past three months, separate Labor Department data showed. While that is a strong pace of hiring, it hasn’t yet replaced half of the 22 million jobs lost in March and April. And as hiring slows, it becomes more likely that many Americans will be unemployed for a longer period. The unemployment rate was 10.2 % in July.

Some businesses have not been able to weather the economic downturn. Seth Brewer said he would be closing his Lexington, Ky., bar permanently at the end of August, which means laying off two of the six employees he had brought back to work in May. A local chef and his assistant, who have operated out of the bar’s kitchen in recent months, will also be out of work.

Mr. Brewer said the bar was not breaking even in recent months, with revenue around 20 % of what it was during the same period last year. Although the place, called Best Friend Bar, was able to provide sit-down service through most of July, a surge in reported Covid-19 cases in Kentucky forced it to switch back to takeout only in late July.

“We’ve been watching our numbers throughout all of this,” Mr. Brewer said of the decision to close permanently. “We didn’t have any reason to assume the picture would get rosier.”

In addition to regular state claims, Thursday’s report showed the number of people applying for special federal pandemic assistance also rose in the week that ended Aug. 15. That program is open to self-employed and other workers who aren’t eligible for state programs. In early August, more than 11 million people were receiving benefits through that programme.

The July 31 expiration of the separate federally funded USD 600-a-week enhanced unemployment aid meant payments to those receiving support through regular state programs fell to levels approved by their states, which average a little more than USD 300 a week, according to the Labour Department.

Ms. Holder, the labour economist, said last week’s increase in jobless claims shows the enhanced benefit’s expiration did not significantly impact the number of new applications being filed. She said she is concerned that reduced government assistance could slow the pace of the economic recovery.

President Trump signed an executive order Aug. 8 allowing states to tap disaster relief funds to pay for a reduced USD 300 a week in enhanced aid on top of state benefits. Several states said this week they are moving to make such payments, but it will take weeks before workers receive the extra amount.

Eleven states have received federal approval to distribute the $300-a-week enhanced benefit, and eight more are awaiting permission to do so, federal officials said Thursday. A Federal Emergency Management Agency administrator said in a press briefing Thursday the agency expects most states to apply to participate, though a few have indicated they might not.

The disaster money is expected to provide about six weeks of enhanced payments, a Labour Department official said, depending on how many states apply.

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