The number of Americans filing first-time claims for jobless benefits unexpectedly dipped last week while staying extremely high, with the labor market recovery appearing to stall as a raging COVID-19 pandemic threatens to overwhelm the country.
Initial claims for state unemployment benefits totaled a seasonally adjusted 787,000 for the week ended Jan. 2, compared to 790,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 800,000 applications in the latest week.
Elevated claims are in line with other data that have suggested the economy was taking a beating from business restrictions and retrenchment in consumer spending because of the pandemic. Minutes of the Federal Reserve’s Dec. 15-16 meeting published on Wednesday showed policymakers expected soaring coronavirus cases “would be particularly challenging for the labor market in coming months.”
COVID-19 cases in the United States have jumped to more than 21 million, with the death toll exceeding 352,000 since the virus first emerged in China in late 2019, according to the U.S. Centers for Disease Control and Prevention.
A report on Wednesday showed private companies shed workers in December for the first time in eight months. Data from Homebase, a payroll scheduling and tracking company, showed a steep decline in the number of employees working in December compared to November. The reports raised the risk that the economy lost jobs in December, though a survey this week showed factory employment rebounding last month.
The government is scheduled to publish its closely followed employment report for December on Friday. According to a Reuters survey of economists, nonfarm payrolls likely increased by 71,000 jobs after rising by 245,000 in November.
That would the smallest gain since the jobs recovery started in May and mean the economy recouped about 12.5 million of the 22.2 million jobs lost in March and April.
Jobless claims are above their 665,000 peak during the 2007-09 Great Recession, though they have dropped from a record 6.867 million in March. The government in late December approved nearly $900 billion in additional fiscal stimulus, including the renewal of a $300 unemployment supplement until March 14.
Economists expect the unemployment subsidy will push up first-time jobless claims after uncertainty whether it would be renewed contributed to a drop in applications in recent weeks.
Government-funded programs for the self-employed, gig workers and others who do not qualify for the state unemployment programs as well as those who have exhausted their benefits were also extended in the latest pandemic relief package.
More fiscal stimulus is likely. Democrats on Wednesday completed a sweep of the two Senate seats up for grabs in runoff elections in Georgia, giving the party control of the chamber and boosting the prospects for President-elect Joe Biden’s legislative agenda.
Congress on Thursday formally certified Biden’s election victory hours after hundreds of President Donald Trump’s supporters stormed the U.S. Capitol.
The economy plunged into recession in February. Though it is expected to have expanded at around a 5% annualized rate in the fourth quarter, the bulk of the rise in gross domestic product will likely come from the rebuilding of inventories after they were depleted early in the pandemic.
The economy grew at a historic 33.4% pace in the third quarter after shrinking at a 31.4% rate in the April-June period, the deepest since the government started keeping records in 1947.