The number of Americans seeking first-time unemployment benefits eased to 1.5m last week, following an unexpected return to hiring as the US reopens its economy after 12 weeks of coronavirus-related shutdowns.
The weekly initial jobless claims have fallen gradually from their peak of 6.9m, as people began to be recalled to work and Washington’s $3tn in fiscal stimulus flowed to individuals and small businesses.
The seasonally adjusted 1.54m initial jobless claims for the week ending on June 6 were down from almost 1.9m the week before, according to the US labour department, marking the 10th consecutive weekly decline. Economists polled by Reuters had expected 1.55m claims in the latest week.
While jobless claims have slowed, the unemployment rate at 13.3 per cent remains at historic levels and above its peak during the 2008-09 financial crisis, highlighting the depth of the coronavirus-fuelled recession and the financial impact for millions of Americans. A total of 44.2m workers have filed first-time unemployment claims since the start of the pandemic.
Continuing claims, which count the number of people actively collecting benefits, fell to 20.9m during the last week in May from almost 21.3m, accounting for 14.4 per cent of the workforce. The so-called insured unemployment rate, which was 14.6 per cent in the previous week, is considered an alternative measure of joblessness.
The federal Pandemic Unemployment Assistance programme, which extends aid to the self-employed or other individuals who would not qualify for regular unemployment compensation, tallied 705,676 new applications, down from 796,813.
Some companies, particularly in ecommerce and logistics, have hired thousands of new workers with consumer demand shifting online.
Joshua Shapiro, chief US economist at MFR, said the pace at which re-employment outpaced job losses and continuing claims receded “will be a barometer of how fast and how completely the economy is recovering”.
“We expect that an initial burst as major population areas reopen will be followed by a longer period where improvement is slower and more uneven, with it taking many quarters for the economy to claw its way back to pre-pandemic levels,” he added.
Economists were caught off guard when US employers added 2.5m jobs in May, far better than the 8m lay-offs that had been forecast. It marked a sharp turnround from the 20.7m jobs lost in April and 1.4m cuts in March.
The May report showed that some of the industries hit hardest by coronavirus shutdowns, such as hospitality, retail and construction groups, had begun hiring workers again.
The Federal Reserve, which on Wednesday forecast that it would keep interest rates near zero until at least the end of 2022, estimated an unemployment rate of 9.3 per cent this year and 6.5 per cent in 2021.
“My assumption is that there will be a significant chunk, well into the millions . . . of people who don’t get to go back to their old job . . . there may not be a job in that industry for them for some time,” said Fed chair Jay Powell.
In other US economic data on Thursday, producer prices recovered in May as the index gained 0.4 per cent against the previous month. That exceeded forecasts for a 0.1 per cent increase, suggesting that “the worst of the disinflationary impulse from the coronavirus crisis is likely behind us”, said economists at Oxford Economics. In April, producer prices were down 1.3 per cent, the steepest monthly drop since 2009.
The report came a day after the labour department said consumer prices had edged 0.1 per cent lower in May, compared with a 0.8 per cent drop in April.
US stocks were on track for a third straight day of losses on Thursday morning, as investors focused on the gloomy economic projections from the Fed and a reported rise in coronavirus cases in some parts of the country. The S&P 500 was trading 2.5 per cent lower shortly after opening, while the tech-heavy Nasdaq Composite fell 2 per cent to pull back from an all-time high.