Par Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits rose unexpectedly last week, confirming that the economic recovery after the COVID-19 pandemic was faltering as government funding declined .
The Labor Department’s weekly jobless claims report on Thursday, the most recent data on the health of the economy, also showed 26 million people were receiving unemployment benefits in early September. The hesitant labor market recovery and a recent increase in new coronavirus infections have prompted Congress and the White House to come up with another bailout.
Federal Reserve Chairman Jerome Powell on Thursday reiterated the need for more fiscal stimulus, telling lawmakers it could mean the difference between a continued recovery and a much slower economic downturn. Further tax relief seems increasingly unlikely ahead of the November 3 presidential election.
“The high rate of unemployment shows that the country is not out of the woods yet and it will not be if Fed officials for more stimulus are not heard by government officials in Washington,” said Chris Rupkey, chief economist at MUFG in New York. “The economy is running on empty. ”
Initial claims for state unemployment benefits increased from 4,000 to 870,000 seasonally adjusted for the week ended September 19. Data for the previous week has been revised to show 6,000 more claims received than previously reported. Economists polled by Reuters had forecast 840,000 candidates last week.
Unadjusted claims increased from 28,527 to 824,542 last week. Economists prefer the unadjusted claim count given previous difficulties in adjusting claims data to seasonal fluctuations due to the economic shock caused by the coronavirus crisis.
Six months after the start of the pandemic in the United States, jobless claims remain above their peak of 665,000 during the Great Recession of 2007-09, although claims have fallen from a record 6.867 million to the end of March.
While the reopening of businesses in May boosted activity, demand in the broad service sector remained lackluster, keeping layoffs high. The job cuts have also spread to sectors such as financial services and technology that were not initially affected by mandatory business closings in mid-March due to insufficient demand.
A total of 630,080 applications were received for government-funded pandemic unemployment assistance last week.
The PUA is for the self-employed, construction workers and others who do not qualify for regular state unemployment programs. PUA claims could fall in the coming weeks after California suspended filing new claims for two weeks last Saturday to fight fraud.
A total of 1.5 million people filed complaints last week.
Stocks on Wall Street were higher. The dollar was lower against a basket of currencies. US Treasury prices have gone up.
The Compensation Claims Report also showed that the number of people receiving benefits after a first week of aid fell from 167,000 to 12.58 million in the week ending September 12.
Economists estimate that so-called continuing claims decrease in part as people exhaust their eligibility for benefits, which are limited to 26 weeks in most states.
Indeed, just under a million workers exhausted their first six months of state unemployment benefits in August. At least 1.6 million workers applied for extended unemployment benefits in the week ending September 5, up 104,479 from the previous week.
Data on continuous claims covered the period in which the government surveyed households for the unemployment rate for September. The drop in mid-September caused the unemployment rate to drop again by 8.4% in August.
“Only faster progress against the virus itself will appease the unemployment struggles of so many workers in fields like entertainment who cannot return to their jobs until social distancing restrictions are relaxed,” said Andrew Stettner, senior fellow at the Century Foundation in New York. .
The Fed cut interest rates to near zero and pledged to keep borrowing costs low for a while, and pumped money into the economy as well. Government money to help businesses has all but dried up. Tens of thousands of airline workers are facing layoffs or time off next month.
A weekly unemployment benefit supplement of $ 600 ended in July and was replaced by a weekly grant of $ 300, the funding of which is already running out.
The decline in fiscal stimulus is already slowing the economy after the strong recovery in activity over the summer. Gross domestic product is expected to rebound at a record annualized rate of 35% in the third quarter after falling to a rate of 31.7% between April and June, the worst performance since the government began keeping records in 1947.
But retail sales and factory production moderated in August. Business activity cooled in September, according to reports. Goldman Sachs (NYSE 🙂 on Wednesday lowered its estimate of fourth-quarter GDP growth to 3% from 6%, citing “the lack of additional budget support.”
Despite the deteriorating fortunes of the economy, the housing market continues to shine, with new home sales nearing a 14-year high in August.