New US jobless claims rise back above 1m

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New claims for US unemployment aid rose back above 1m last week, as the pace of lay-offs picked up again in a worrying sign for the recovery of the labour market in the world’s largest economy.

There were 1.1m initial jobless claims on a seasonally adjusted basis for the week ending August 15, the US Department of Labor said on Thursday. That was higher than economists’ forecast for 925,000 claims. A week earlier, claims totalled 971,000, having slipped below 1m for the first time since the pandemic initially struck the labour market in March.

“It was hoped that for the second week running, the number of people filing for unemployment benefits in the US would be below the all-important million mark . . . there was at least a sense that the employment market was healing but this print emphasises the glacially slow pace,” said Charles Hepworth, Investment Director, GAM Investments.

The disappointing data comes amid a political stand-off between the White House and congressional Democrats over the extension of new fiscal stimulus to prop up the US economy, including a big disagreement over the payment of federal unemployment benefits.

Democrats have pushed to extend emergency jobless benefits worth $600 per week, which expired in late July, until early next year, but Republicans are proposing to slash the amount.

While Donald Trump took executive action to use disaster relief funds to temporarily extend some jobless benefits at a lower level, the money has not started flowing in any significant amount. “We badly need a relief package to boost the economy and restore enhanced benefits for unemployed workers,” Don Beyer, the Democratic congressman from Virginia and vice-chair of the Joint Economic Committee, wrote on Twitter, describing the data as “terrible news”.

The figures also showed that applications for Pandemic Unemployment Assistance rose on the previous week. The federal programme, which extends benefits to the self-employed or other individuals who would not qualify for regular unemployment payments, had 542,797 new applicants on an unadjusted basis, compared with 489,639 the week before.

“We had thought that the momentum would continue this week, but it seems that President Trump’s Executive Order that restored $400 of that $600 benefit has pushed some people at the margins of the labour market back to the unemployment office,” economists at Jefferies said.

Eleven states have agreed to provide additional aid under the executive order, according to the Federal Emergency Management Agency. The benefits would be retroactive to August 1.

The number of Americans actively collecting state jobless aid fell to 14.8m, from 15.5m earlier, for the week that ended August 8. Economists expected continuing claims to hit 15m. Continuing claims, which hit a peak of 24.9m in May, are down from a mid-July level of nearly 17m.


10.2%


Continuing unemployment benefit claims

Continuing claims equalled 10.2 per cent of the workforce, down from 10.6 per cent. It was the lowest insured unemployment rate since early April, although joblessness remains historically elevated. The insured unemployment rate hit a high of 5 per cent during the 2008-09 downturn.

“The decline suggests that some rehiring is occurring, which is encouraging. However, the number of individuals claiming benefits remains extraordinarily high — more than twice the peak of the Great Recession — underscoring that the labour market is a long way from being healthy,” according to analysts at Oxford Economics.

Weekly claims had fallen in each of the last two weeks after ticking up in July following moves by California, Texas and Florida — the three most populous US states — to reimpose curbs on businesses in hopes of stifling the spread of coronavirus. Infection rates and active hospitalisations for Covid-19 have since eased in several states that experienced outbreaks this summer, raising hopes that they have turned a corner in their fight against the virus.

Advance figures indicated that New Jersey and New York — two of the states hit hardest early in the pandemic — had the largest gains in initial claims last week, followed by Texas, Washington and Florida. Georgia and Nevada recorded a slower pace of claims.

Robert Frick, corporate economist at Navy Federal Credit Union, said the rise in claims was a “temporary setback” with outbreaks receding and businesses gradually reopening. But it “underscores the economy is fighting in the trenches with Covid-19 now and Americans are losing jobs through secondary lay-offs, bankruptcies and other factors that happen too quickly and too chaotically to accurately be accounted for week-to-week”, he added.

The Department of Labor said there were 28.1m people claiming benefits in state and federal programmes as of August 1, based on unadjusted figures that are reported on a two-week delay. This tally, which was 28.3m in the previous week, includes PUA claims and another programme under the Cares Act that extends unemployment benefits for up to 13 weeks.

US stocks were weaker on Thursday, with the S&P 500 down by 0.3 per cent.

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