New US Jobless Claims Drop Below 1 Million, First Time Since March
The US Labor Department on Thursday reported fewer than one million new weekly claims for unemployment benefits for the first time since the coronavirus pandemic struck in March.
The result was better than expected but analysts warn the United States remains in the midst of an unemployment crisis after business shutdowns to stop the spread of COVID-19 led to tens of millions of layoffs.
The Labor Department data showed 963,000 seasonally adjusted initial claims filed in the week ended August 8, a drop of 228,000 from the previous week.
The insured unemployment rate also dropped 0.4 percentage points to 10.6 percent in the week ended August 1, the latest week such data was available.
But despite the improvement, a massive 15.5 million people were still receiving benefits, and the new claims filed in the week ended August 8 were above the worst week during the global financial crisis.
“Claims will remain elevated compared to historical levels and, given the likelihood of another round of layoffs in the offing among small and midsize firms due to insufficient demand as the economy continues to slow, claims may reverse,” Joseph Brusuelas, chief economist at RSM US, said on Twitter.
The data comes as Democratic lawmakers in Congress negotiate with President Donald Trump’s administration over a follow-up to the $2.2 trillion CARES Act rescue package passed as the pandemic hit.
Among the sticking points is the issue of how much to give state and local governments in aid as well as the fate of extra payments to the unemployed. The CARES Act gave the jobless an extra $600 per-week on top of their state benefits, but that money has expired and lawmakers can’t agree on how much to spend on that going forward.
The CARES Act also created a special program allowing people not normally eligible for unemployment benefits to receive assistance. In the week ended August 8, claims under that program decreased by more than 167,000 to 488,622.
All told, nearly 28.3 million people were receiving some form of government aid in the week ended July 25, down more than three million from the week prior.
That was many times above the 1.7 million people receiving benefits in the same week of 2019, another sign of the damage done by lockdowns to stop COVID-19 that began in mid-March.
Rubeela Farooqi of High Frequency Economics called the latest data “a move in the right direction” but warned the world’s largest economy remains in a weakened state, particularly with the pandemic still raging.
“Even as businesses have reopened and jobs have returned, layoffs are continuing to mount, likely reflecting interruptions to activity from virus containment,” she said in an analysis.
“The risk of permanent job losses and damage to the labor market remains high, which will slow the pace of recovery. The economy faces a long and uncertain road back to pre-pandemic levels of prosperity.”