Jobless claims dip below 800,000, but layoffs in the U.S. still elevated after record coronavirus outbreak

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Jobless claims dip below 800,000, but layoffs in the U.S. still elevated after record coronavirus outbreak


The numbers: New applications for state unemployment benefits fell slightly around Christmas and dipped below 800,000 for the first time in a month, but the record coronavirus outbreak is still weighing heavily on the labor market and throwing more people out of work.

Initial jobless claims filed traditionally through the states slipped by 17,000 to 787,000 in the seven days ended Dec. 26, the government said Thursday.

Economists polled by MarketWatch had forecast initial jobless claims to total a seasonally adjusted 835,000.

It’s possible the decline stemmed from people waiting to apply for benefits until after the holiday. Uncertainty over whether Congress would approved extended jobless benefits before they ran out at the end of the year might have also played a role.

Whatever the case, job losses each week are still extremely high.

Another 308,262 applications for benefits were filed last week through a temporary federal-relief program created during the pandemic, putting the total number of new claims last week at 1.15 million. Combined claims have yet to fall below 1 million a week.

President Trump signed a law last week that extends unemployment benefits for jobless Americans and increases payments by up to $300 a week. Benefits could have been cut off for millions of people had Washington failed to act, and some might still face delays in payments.

Read: When will jobless Americans get their extra $300 in benefits

While jobless claims have correctly reflected the rise and decline in unemployment during the pandemic, a government watchdog agency also found the number of distinct individuals applying for or collecting benefits has been inflated by fraud, double counting and other problems.

Read: Jobless claims inflated, GAO finds

The Bureau of Labor Statistics plans to take steps to improve the data, but for now the claims report is not considered entirely accurate. Economists say to pay attention to the direction of claims instead of the totals.

Read: Why the inaccurate jobless claims report is still useful to investors

What happened: New jobless claims in the states had slid to a pandemic low of 711,000 in early November before a record increase in coronavirus cases pushed them back above 800,000. They are likely to remain elevated until the latest coronavirus surge begins to recede.

Initial claims fell the most last week in Illinois, Texas, Florida and Georgia.

The biggest increases occurred in California and New York, as has been the case throughout the pandemic. Kentucky also reported a big increase.

Meanwhile, the number of people already collecting state jobless benefits, known as continuing claims, declined by 103,000 to a seasonally adjusted 5.22 million. That’s a new pandemic low.

Yet millions of people who have run out of state benefits have simply shifted to a temporary federal-aid program because they still can’t find work. Continuing claims funded by the federal government were little changed at 4.77 million in the week ended Dec. 12, the latest data available.

Applications for federal unemployment benefits have more than tripled since August, reflecting increased hardship for many people who’ve permanently lost their jobs.

Altogether, the number of people receiving benefits from eight separate state and federal programs was reported at an unadjusted 19.6 million as of Dec. 12. That was down almost 800,000 from the prior week.

Those numbers are also under dispute, though. The government’s more comprehensive monthly jobs report indicated that a far smaller 10.7 million people were unemployed at the end of November.

Economists say the true number of unemployed is probably in the middle.

Read: U.S. consumer confidence tumbles in December

Big picture: The economy has clearly suffered another setback from the coronavirus pandemic and it’s possible that employment could shrink in December for the first time since the start of the pandemic last April when monthly data is published in early January.

A fresh round of federal aid will help unemployed Americans and struggling businesses to get through the next several months, but the economy won’t make a broader recovery until the vaccines become more widespread and the epidemic fades.

See: MarketWatch Coronavirus Recovery Tracker

What they are saying? “Initial jobless claims dropped a bit, but at levels this high and with margins of error this big, they’re essentially stuck at a painful, inflated level due to the coronavirus surge,” said Robert Frick, corporate economist at Navy Federal Credit Union.

“And as long as that surge continues, even with stimulus, we can expect more than 1 million Americans will lose their jobs weekly, based on state and federal measures.”

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.24%

and S&P 500
SPX,
+0.13%

were set to open mildly lower on Thursday, the last trading day of the year. Trading volume was expected to be light.

The weekly claims report is the last one the government will publish in 2020. Markets are closed on Friday for the New Year’s Day holiday.



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