U.S. Unemployment Claims Fell to 779,000 Last Week

The number of workers seeking unemployment benefits fell for the third straight week, a sign that layoffs have started to ease following an increase in early January.

Initial weekly unemployment claims declined to 779,000 last week, the Labor Department said Thursday, following a revised 812,000 claims the prior week.

The recent easing in weekly jobless claims—a proxy for layoffs—pointed to a stabilization in the number of workers applying for benefits, though the total remained at a higher weekly level than before a winter surge in coronavirus cases.

Claims also remained well above the pre-pandemic peak of 695,000 and are still higher than in any previous recession for records tracing back to 1967.

The latest jobless claims figures came a day before the government releases a more detailed look at U.S. employment in January. Economists forecast that employers added 50,000 jobs last month, following a 140,000 decline in December that marked the first decrease in payrolls in seven months. The unemployment rate is forecast to hold steady at 6.7%.

Jobless claims will likely hold steady at high levels until the course of the coronavirus is under control, said

Diane Swonk,

chief economist at Grant Thornton. “We have yet to break out of the vicious cycle of reopening and reinfection,” she said.

Weekly claims numbers can be volatile. The four-week moving average was 848,250 last week, and January had some of the highest four-week averages since September.

Ms. Swonk added that falling weekly claims don’t necessarily signify improvement in the labor market. She pointed to an increase in the number of workers seeking extended benefits, which rose by 197,000 to 1.7 million in the week ended Jan. 16, the most recent week those figures are available. That, she said, was a sign that the ranks of the long-term unemployed are growing.

Cold weather, a surge in Covid-19 case numbers and the threat of new, highly contagious variants of the virus have contributed to a broader winter slowdown that has hindered the labor market’s recovery in recent weeks, economists say.

Services industries, particularly leisure and hospitality, have struggled to recover as the virus continues to limit in-person businesses. Manufacturing, meanwhile, a smaller part of the U.S. economy, has become a bright spot as demand for goods picks up. The Congressional Budget Office this week said it could take several years for the number of employed workers in the U.S. to return to its pre-pandemic peak.

A separate report showed the pandemic’s effect on worker productivity. U.S. labor productivity fell at a 4.8% annual pace in the final months of 2020, the biggest quarterly decline since 1981, the Labor Department said. In the fourth quarter of the year, worker hours increased at a 10.7% pace and output rose at a 5.3% pace, pushing overall productivity lower.

Another report released Thursday added to evidence that U.S. manufacturing continued to recover from the pandemic. New orders for factory goods rose 1.1% in December compared with the previous month, data from the Commerce Department showed. That marked the eighth straight month of gains.

Christine Fitzgerald, 56 years old, of Berlin, Conn., was laid off from her job as a marketing manager after her employer, an insurance company, was acquired last spring. She is still looking for work and has been a finalist for about seven positions, she said, all of which eventually fell through.

“It becomes, ‘How are you going to reinvent yourself?’ ” Ms. Fitzgerald said. She recently completed a professional development course on transferring her experience in corporate marketing to the nonprofit sector.

Ms. Fitzgerald filed for unemployment aid in late April, which she has used to help cover bills and support her two daughters, one in high school and the other college. She said competition for a job has been fierce—one online job posting had more than 7,000 applicants. “There’s a lot of talent on the street right now,” she said.

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The Covid-19 pandemic continues to upend the job market. Whether you’re a new graduate, trying to get back in the game or seeking a new skill set, join our March 4 summit for how to navigate a competitive market. Register here.

Economists expect the labor market to improve this year as vaccines help ease the pandemic and the government provides additional support for the economy. Congress is also considering as much as $1.9 trillion in additional financial aid to help households and businesses. The proposal would bolster unemployment aid, provide funds for vaccine distribution and send $1,400 checks to many Americans.

The U.S. unemployment rate shot up faster than in any other developed country during the pandemic. WSJ explains how differences in government aid and labor-market structures can help predict how and where jobs might recover. Video/Illustration: Jaden Urbi/WSJ (Originally Published Sept. 4, 2020)

Write to Hannah Lang at Hannah.Lang@wsj.com

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