The number of Americans seeking unemployment benefits unexpectedly rose above one million last week, official figures show.
The US Department of Labor said claims reached 1.1 million, ahead of economists’ forecast of 925,000.
The hike came as US President Donald Trump faces increased pressure on his handling of the health crisis.
Coronavirus infections continue to spread in the United States, prompting local authorities to restrict businesses.
The number of people claiming unemployment benefits had fallen over the previous two weeks. Most recently, it dropped below the million to 971,000 for the first time since March of the week through August 8,
But economists have warned that the recent improvement in employment is likely to stagnate, as health concerns push people to limit activities and spending even as the reopening continues.
“The current rise in initial unemployment will disappoint the market, especially after the promising data last week,” said Richard Flynn, UK managing director of broker Charles Schwab.
“As hard-hit industries brought workers back in July, the level of weakness remains unprecedented, and the impact of virus-related phased shutdowns may continue to reverse some of that improvement. “
The US economy suffered its largest economic contraction in more than 70 years of record keeping between April and June, shrinking at an annual rate of 33%.
Although the unemployment rate fell from its peak of 14.7% in April with the opening of businesses and the resumption of activity, the 10.2% rate recorded in July remains higher than any what month of the financial crisis.
Analysis: no time to back down
By Michelle Fleury, American Commercial Correspondent
This data doesn’t sound like the V-shaped recovery that President Trump and Republicans are banking on.
With the number of Americans reporting unemployment at seven digits after two weeks of decline, the job market is a reflection of the upheavals facing the world’s largest economy.
And yet, at this key inflection point, Congress is still divided over the next relief plan that could help many Americans who lost their jobs when the United States shut down to stop the spread of the coronavirus.
Republicans want a smaller package.
They point to improvements in the economy: The S&P 500 hit a record high this week, retail sales have rebounded and housing construction is strong.
Still, a lot of people don’t feel better.
Thousands of businesses are still closed. The unemployment rate is over 10%. And food insecurity is on the rise.
President Trump this month issued an executive order that provided $ 300 per week in additional unemployment benefits after a congressionally approved $ 600 per week payment expired in July. But help is limited and in some states it should only last three weeks.
With the recovery far from assured, most economists warn that now is not the time for the federal government to pull out.
More than 28 million people – nearly a fifth of the U.S. workforce – were receiving some form of unemployment benefit in the week that ended August 1.
“The number of people claiming benefits remains extraordinarily high – more than double the peak of the Great Recession – underscoring that the labor market is far from healthy,” said Nancy Vanden Houten, senior US economist at Oxford Economics.
Talks in Washington over additional economic aid for the people collapsed this month without a deal.
The lack of a deal meant that a weekly supplement of $ 600 that Congress had approved for unemployment benefits during the pandemic expired at the end of July.
Analysts have warned that the pullback is likely to further hurt the US economic recovery, which relies on consumer spending.
Democrats have called for more than $ 3 billion in additional spending – a figure Republicans dismissed as too high.
The deadlock puts Mr. Trump, who is due for re-election in November, in a potentially perilous position.
While polls suggest voter approval for his management of the economy remains relatively strong, Democrats blame him for the crisis.
“Trump’s ignorance and incompetence have always put our country in danger. COVID-19 was its biggest test – and it failed miserably, ”Senator Elizabeth Warren said on Twitter. “America has the most COVID-19 deaths in the world and an economic collapse – and both crises hit black and brown families the hardest. ”
Mr Trump has said he supports more aid and has used his power to try to increase unemployment payments.
But its orders do not fully replace the $ 600 bonus and have not been extended everywhere, since the program would need the support of local authorities.