Ten months after the coronavirus crisis decimated the job market, the resurgence of the pandemic continues to cause shock waves in the American economy.
Although more than half of the 22 million jobs lost last spring were recovered, a new outbreak of infections has led to closings and layoffs that have hit the leisure and hospitality industries particularly hard, reversing the recovery.
The latest evidence came on Thursday, when the Labor Department reported that the state’s initial claims for unemployment benefits increased sharply last week, exceeding one million for the first time since July.
A few days earlier, the government announced that employers had eliminated 140,000 jobs in December, the first net drop in employment since last spring, with restaurants, bars and hotels recording sharp losses.
“We are in a deep economic hole and digging in the wrong direction,” said Daniel Zhao, senior economist at the career website Glassdoor. “The report obviously shows that the increase in claims is worse than expected, and there is reason to think that things will get worse before it gets better.”
That outlook is even more worrying because an important element of the aid package signed by President Trump last month – a $ 300 weekly federal supplement for other unemployment benefits – is set to expire in mid-March.
President-elect Joseph R. Biden Jr. said he will force a new stimulus package to Congress to provide a lifeline for workers and employers until the pandemic can be brought under control. Your plan will include direct payments to most families, along with helping small businesses and local and state governments.
Recent economic data has brought a new sense of urgency to these efforts, with millions struggling to survive, even as more job losses are imminent.
The Labor Department said on Thursday that 1.15 million workers filed for initial state unemployment insurance claims during the first full week of the new year. Another 284,000 claims were made for Pandemic Unemployment Assistance, a federal emergency program for freelancers, part-time workers and others normally ineligible for state unemployment benefits. None of the numbers are seasonally adjusted. On a seasonally adjusted basis, new state claims totaled 965,000.
Before the pandemic, weekly records totaled about 200,000.
Holidays may have held back unemployment claims in the past few weeks, with people waiting until the new year to file claims. But several economists expressed skepticism that delays in lawsuits were the main factor in the rise in claims last week.
“I don’t think there’s any doubt that, on the margin, there may be some unusual things going on,” said Mark Hamrick, senior economic analyst at Bankrate.com. “But we also have to think about the fact that these are not our grandfather’s unemployment lines – which means that a lot of this is done digitally. I think if someone just tries to understand human nature, it doesn’t make much sense for someone to delay a request for financial help when they are out of work. “
Most likely, economists say, the $ 300 federal supplement has generated an increase in demand for benefits.
The confusion over the new federal aid – which Trump spent several days threatening not to sign – may also have temporarily delayed requests for Pandemic Unemployment Assistance, which fell during the week ending on January 2. The increase last week brought the numbers more in line with previous high levels.
Even with the new federal aid for the unemployed in last month’s legislation, concerns over payment processing remain – a task left to the states – after problems with the initial round of emergency benefits last spring.
“States are extremely cautious now to get as much guidance as possible,” said Michele Evermore, senior policy analyst at the National Employment Law Project, a nonprofit group for workers’ rights. But she said that some states, including New York, seem better equipped to act quickly this time, taking a “ask questions later” approach.
She said she expects that next week most states will have “a significant part” of their program up and running, if not all components.
In addition to the $ 300 weekly supplement and the short-term renewal of benefits for temporary and self-employed workers, the latest round of federal aid renewed Pandemic Emergency Unemployment Compensation, a program for those whose state benefits are over.
The disparate nature of state unemployment programs, some of which provide only 12 weeks of benefits in normal times, has made them a target for Democrats. Biden has pledged to ensure that Americans can get their unemployment insurance “on time and in full,” and Senator Ron Wyden, Oregon Democrat and new chairman of the Senate Finance Committee, said he would push to include a review of the system of the country’s unemployment benefits.
Among the provisions supported by some Democrats are an automatic renewal of federal unemployment benefits and other aid until the unemployment rate drops to a certain level. This would alleviate the need for repeated actions by Congress in times of crisis.
Meanwhile, as the coronavirus hits the service sector, employers are likely to cut more jobs in the coming weeks. Some struggling companies may not survive.
“When I look at the pandemic situation and the health situation, people are still afraid of the virus, as they should be, and it will have an economic impact,” said AnnElizabeth Konkel, economist at the career site Really. “The virus is the root of everything that is happening now.”
Still, economists and analysts see better times ahead, possibly as early as spring. As more people are vaccinated, cases will begin to decline, which will ease restrictions on business and could lead to a resurgence in consumer activity. The warmer climate may allow more people to gather outside, reducing the spread of the virus, as it did last year. A new stimulus package could also ease some of the economic pain of the pandemic.
However, even when the coronavirus is contained, economists say that a recovery will not happen overnight.
“As we enter the second quarter, the economy should start to recover,” said Bankrate’s Hamrick. “But obviously, all of this took much longer than anyone expected and the cure will probably take some time as well.”