A gauge of U.S. layoffs rose back above 1 million last week, signaling the recovery from the COVID-19-induced recession will continue to be volatile as recent infection surges ease in some states but persist in others.
About 1.1 million Americans filed first-time applications for unemployment insurance, the Labor Department said Thursday, up from 971,000 the prior week. Economists surveyed by Bloomberg estimated that 920,000 workers sought jobless benefits.
A mind-boggling 57.3 million workers now have filed for unemployment over the past 22 weeks. Before the pandemic, the previous all-time high for weekly claims was 695,000 during a recession in 1982.
The good news is that continuing claims, which represent all American still receiving benefits with a one-week lag, fell sharply to 14.8 million from 15.5 million the previous week. Economists have been focusing more on that number because if reflects all those still unemployed and accounts for people who have returned to work as businesses have reopened. That figure has dropped by more than 2 million the past three weeks, indicating that many laid-off workers are being rehired.
The 135,000 increase in initial claims follows two weeks of 200,000-plus drops. The numbers have been volatile in part because of a spike in coronavirus cases in July, particularly in the South and West. States that allowed shuttered businesses to reopen early had to pause or reverse those plans, slowing or halting the rehiring of laid off-workers and spurring another round of job cuts at many restaurants, shops and other businesses.
The recovery from those flare-ups has been uneven. COVID-19 cases generally have trended lower across the U.S. recently and the share of positive tests has fallen in Arizona and Texas, two hot-spot states, Goldman Sachs wrote in a research note.
But cases remain high in Florida and Georgia, Goldman notes. And the resumption of in-person classes at some universities has sparked fresh outbreaks.
Last week, initial claims rose by about 11,000 in New Jersey, 10,000 in New York, 9,000 in Texas and 5,000 in Florida. Meanwhile, claims fell by about 4,000 in Nevada as well as Georgia.
An additional 543,000 people filed initial claims under a separate program that expands eligibility to the self-employed and independent contractors, among others, during the crisis. About 11.2 million Americans were already receiving unemployment section of that program, known as Pandemic Unemployment Assistance.
The latest claims totals could be significant because they represent the first since the government closed the window for applications for forgivable federal loans to small businesses that retain or rehire employees, says Nomura economist Lewis Alexander. Also, the vast majority of businesses have exhausted the money they received under that initiative, known as the Paycheck Protection Program, prompting some struggling businesses to lay off more workers.
Congress remains deadlocked over a proposal to extend a $600 federal weekly supplement to state unemployment benefits that expired July 31. Democrats want to continue the bonus into next year while Republicans prefer to trim it to $400. President Trump has signed an executive order to provide the additional $400 but asked states to cover $100 of that cost. It’s unclear if Trump has the authority to extend the benefit without legislation, and it could take months for states to implement it.
Meanwhile, the expiration of the $600 may have led many workers to forgo filing initial claims, JPMorgan Chase says, distorting the reading on U.S. layoffs provided by the weekly report.
At the same time, Barclays says recent initial claims figures may have been inflated by state backlogs and duplicate applications. Also, the totals don’t capture layoffs only. Furloughed workers and those with reduced hours also can apply for benefits during the crisis.
The latest claims totals will figure into the August employment report. Some economists say the survey could show fresh net job losses — including layoffs and new hiring — as a result of the coronavirus spikes. From May through July, the economy recovered 9.3 million of the 22 million jobs lost in the early days of the pandemic.