WASHINGTON (Reuters) – The number of Americans applying for new unemployment insurance fell slightly last week as the job market continued to decline, but a drop in new COVID-19 cases increased cautious optimism that momentum could increase in the spring.
The Department of Labor’s weekly unemployment claims report, the most timely data on the health of the economy, also highlighted the scars of the labor market, with more than 20 million people receiving unemployment checks in late January. .
“Claims are still stuck at painfully high levels,” said Robert Frick, corporate economist at the Navy Federal Credit Union in Vienna, Virginia. “But we are seeing signs of hope that the claims will begin to decline significantly in the next month or two.”
Initial claims for state unemployment benefits fell 19,000 to 793,000 seasonally adjusted in the week ending February 6. The previous week’s data was revised to show 33,000 more orders received than previously reported. Economists polled by Reuters had forecast 757,000 registrations for the past week.
Unadjusted claims decreased from 36,534 to 813,145 last week. There have been notable leaps in filings in California and Ohio. Including a government-funded program for self-employed workers, concert workers and others who do not qualify for regular state programs, 1.148 million people filed lawsuits last week.
Claims are stuck at the upper limit of their 711,000-842,000 range between October and November. They remain above the 665,000 peak during the 2007-2009 Great Recession, although they are below the record 6.867 million reported last March, when the pandemic hit the United States.
The recovery of the labor market has stalled in recent months, as the country struggled against the resurgence of coronavirus infections, which devastated restaurants and other consumer-oriented companies. The government reported last Friday that the economy created just 49,000 jobs in January, after losing 227,000 in December.
Labor market problems strengthen the case of the $ 1.9 trillion proposed recovery package by President Joe Biden, which is being considered in the US Congress. The government provided almost $ 900 billion in additional aid to the pandemic in late December. Republican lawmakers are opposed to the planned large fiscal stimulus due to concerns about the increase in national debt.
Wall Street stocks were trading higher. The dollar was stable against a basket of currencies. US Treasury prices were mostly lower.
LONG BOUTS OF DESEMPLOYMENT
But there are glimpses of hope on the horizon. New coronavirus cases in the United States fell 25% last week, the biggest drop since the pandemic hit the country. Infections have already fallen for four consecutive weeks, according to a Reuters analysis of state and municipal reports.
If the trend continues and the distribution of vaccines expands, this, together with additional stimulus, could allow the reopening of more businesses. There are signs that companies are testing the waters. Temporary jobs, usually considered a harbinger of future hires, jumped in January.
“Temporary and contract jobs are slightly ahead of where they were at the same time last year,” said Richard Wahlquist, executive director of the American Staffing Association.
For now, the slack in the job market remains immense. The claims report showed that people who received benefits after an initial week of aid dropped 145,000 to 4,545 million in the week ending January 30. But the drop in so-called ongoing claims was mainly due to the exhaustion of eligibility for benefits, limited to 26 weeks in most states.
At least 4.778 million people received extended benefits during the week ending January 23, an increase of 1.2 million over the previous period. These government-funded benefits will expire in mid-March if Congress does not approve the Biden government’s aid package.
Another 1.653 million were on a state program for those who exhausted their first six months of aid. This means that 6.4 million people have been unemployed for more than six months.
“This is by far the largest we have seen at any time during this crisis,” said AnnElizabeth Konkel, economist at the Hiring Laboratory. “Long-term unemployment is happening now and it is a very real challenge for recovery.”
About 20.435 million people were receiving benefits from all programs during that period, an increase of 2.6 million over mid-January. The increase partly reflected the extent of government-funded benefits at the end of December and underscored the widespread nature of unemployment.
“The unemployed are having a hard time re-entering the workforce, and that highlights the need for additional federal aid,” said Scott Anderson, chief economist at Bank of the West in San Francisco.
The economy recovered 12.3 million from the 22.2 million jobs lost during the pandemic. The Congressional Budget Office estimated that employment would not return to the pre-pandemic level until 2024.
Reporting by Lucia Mutikani; Editing by Paulo Simão