The number of Americans applying for unemployment dropped last week, slipping below 1 million for the first time since the economic shutdown sparked by the coronavirus pandemic began in the spring.
The number of new applications for benefits, a rough gauge of layoffs, declined to 963,000, the Labor Department said Thursday. It was the second straight drop, from 1.2 million the previous week.
It’s the first time weekly claims have dipped below 1 million since March, and was sharply lower than the 1.25 million some economists expected.
“Another larger-than-expected decline in jobless claims suggests that the jobs recovery is regaining some momentum,” Oxford Economics said in an investors note. “But with a staggering 28 million workers still claiming some form of jobless benefits, much labor market progress remains to be done.”
But the latest stream of applications is still historic, dwarfing the previous all-time weekly high of 695,000 during another economic downturn in 1982. And the latest tally means a stunning 56.2 million Americans sought unemployment aid in just 21 weeks.
The number of claims has ebbed and flowed in recent weeks, but stubbornly remained above 1 million, painting a stark picture of the financial toll the coronavirus pandemic has taken as businesses cut staff and consumers warily watch their spending.
Continuing unemployment claims shrank to 15.5 million last week, their lowest level since the start of April, but that is still “historically high … underscoring the painfully slow recovery in the labor market,” Oxford said.
Unemployment slipped to 10.2% in July, down from 11.1% in June. But the economy continues to stumble through fits and starts, with hard-hit industries like hospitality and retail companies bolstering their staff in some parts of the country, while businesses in the Sunbelt cut jobs as the coronavirus spikes there.
The extra financial aid and protections extended to help out-of-work Americans weather the economic downturn remains in limbo. An additional $600 weekly benefit from the federal government ended in July, and Congress has been unable to sign off on a new aid package.
Democrats want to reinstate the extra $600 through the end of the year while Republicans want to reduce it to $200 a week.
President Donald Trump issued a memorandum that would provide unemployed Americans with an additional $400 per week. But that will likely be pared back to $300 after states balked at the requirement that they kick in a quarter of the funding, a contribution they say they can’t afford as they deal with their own budget shortfalls.
White House economic adviser Larry Kudlow said Tuesday the states won’t have to pay the additional $100 if they already provide at least that amount in jobless benefits, which most states do. Kudlow added that the checks should start going out in the next two weeks, but critics of the memorandum say that it may not be legal or even unconstitutional for Trump to bypass Congress and take such a step by executive action.
Many businesses have also gone through the forgivable federal loans they received if they held onto or rehired their workers, leading to new rounds of layoffs.
Because those funds are running out, and Congress has not passed another financial assistance package “we may see a reversal in the gains in August,” Sophia Koropeckyj, an economist at Moody’s Analytics, said in an investors note. “Without this extra support, consumer spending will certainly weaken.”
A deal will probably eventually be reached, she says. But it will take more than money to get the economy going again.
“We are still confident that Congress and the White House will rally to provide about $1.5 trillion in support,” she said. “Yet, until a vaccine is widely available we do not expect the economy and labor market can climb completely out of the hole… Indeed we expect the economy to barely eke out any gains until 2021.”