For the first time in three weeks, new unemployment benefits have fallen, the government reported Thursday, but the economy remains under pressure as Covid-19 cases rise in some states and new restrictions on businesses threaten.
Thanksgiving has likely delayed claims filings, and economists are warning that more jobs will be lost if the pandemic worsens.
“It’s still bad,” said Diane Swonk, chief economist at Chicago accounting firm Grant Thornton, noting that recent job losses have been widespread and focused on industries that were hard hit at the start of the pandemic: food services, healthcare, Retail companies and hotels.
Nearly 714,000 people first filed for state unemployment insurance last week, compared to 836,000 the week before, the Department of Labor reported. Taking into account seasonal variations, the total for the past week was 712,000.
“People don’t apply that often when there is a vacation,” added Ms. Swonk. “There is a natural drop, but we just don’t know how big it was.”
Ms. Swonk compared the effect to the decline in hospital data for the coronavirus seen on Sundays and public holidays. The Thanksgiving-related decline could be offset by belated claims when the numbers are released this week.
Nearly 289,000 new claims have been recorded through the Pandemic Unemployment Assistance program, which supports freelancers, gig workers, self-employed and others who are normally not eligible for unemployment insurance.
Pandemic Unemployment Assistance is one of two federal unemployment assistance programs due to expire at the end of the month. Millions will strive to make up for the lost aid, even if their reduced purchasing power dampens overall economic growth.
A new stimulus package has proven elusive on Capitol Hill due to a stalemate, though compromise efforts by a bipartisan group of lawmakers this week added some momentum.
The lack of additional help has led many economists to lower their economic forecasts. Mike Gapen, chief US economist at Barclays, sees virtually no growth in the first quarter of 2021, followed by a rebound as mass vaccination begins and consumer behavior returns to normal.
Indeed, there are some hopeful indicators besides the darkness in the job market: a booming stock market, brisk sales of new and existing homes, and reasonably healthy spending for the holiday shopping season.
But until the pandemic is under control, these factors will be overwhelmed by official restrictions on businesses and reluctance to engage in activities such as traveling or eating indoors.
“I think the economy is on solid foundations, but we might just have a few problems by the end of the first quarter,” said Gapen. “Stimulus would of course be helpful.”
Economy & Economy
Apr. 11, 2020, 6:16 pm ET
To make matters worse, the rise in Covid-19 cases has led to a wave of hospitalizations that threaten to overwhelm the health system and force a return to the stay-at-home instructions imposed last spring. California, for example, is considering another lockdown to curb the spread of the pandemic. This would have far-reaching implications.
Other severely affected states are already seeing extensive layoffs. Illinois reported nearly 19,000 initial unemployment insurance claims in the week ended November 21, while Michigan reported more than 17,000 claims. In both states, hotels and restaurants were among the hardest hit industries.
Joshua Shapiro, chief economist at US consulting firm MFR, found that the highest weekly number of unemployment claims prior to the 1982 pandemic was 695,000, well below last week’s total.
“The fact that the first claims are still at such a high level more than eight months after the start of the crisis is bad news in absolute terms,” he said in a statement to customers. “As the pandemic deepens again, it is likely that claims will remain quite high for some time.”
Further guidance on economic developments is due on Friday morning when the Department of Labor publishes its monthly employment report, which lists the hiring of employers and the ranks of the unemployed.
In October employers created 638,000 jobs. The Wall Street analysts polled by Bloomberg assume that the November report will show 469,000 new jobs and the unemployment rate will fall from 6.9 percent to 6.8 percent.
However, there is an extraordinary range of forecasts, with some economists forecasting a profit comparable to October and others warning of a loss of tens of thousands. Oxford Economics expects a net loss of 60,000 jobs for the report. That would be the first drop since April, while Morgan Stanley Research is forecasting an increase of 630,000.
One reason for the dissonance is that measures to measure the health of the economy are under a contradictory and confusing onslaught.
“The barometers with which economists anticipate the job report are currently all giving us different measurements,” said Ernie Tedeschi, economist at the accounting firm Evercore ISI. “We’re just not sure what data is good ahead of time to capture the extraordinary circumstances of a pandemic during the holiday season and what data will not be good.”
Patricia Cohen contributed to the coverage.