WASHINGTON (Reuters) – The number of Americans filing for the first time for unemployment benefits increased last week, confirming a weakening in labor market conditions as a worsening COVID-19 pandemic disrupts restaurant operations. and in other activities.
The larger-than-expected increase in weekly jobless claims reported Thursday by the Department of Labor was seen by some economists as being driven by the recent renewal of supplementary unemployment benefits, but still increased the risk of further job losses in January after the collapse of non-farm payrolls. December for the first time in eight months.
A stalled labor market recovery could put pressure on the new Biden administration for a broader aid package. Joe Biden will take over from President Donald Trump next Wednesday. Thursday is expected to propose a stimulus of up to $ 2 trillion. The government approved nearly $ 900 billion in additional aid at the end of December.
“The economy clearly needs further support from Washington because right now the rise in jobless claims tells us that the recovery in the labor market has stalled and the direction is completely down, “said Chris Rupkey, chief economist at MUFG in New York.
Initial claims for state unemployment benefits increased from 181,000 to 965,000 seasonally adjusted for the week ending January 9, the highest since late August. Economists interviewed by Reuters had forecast 795,000 questions in the past week.
Unadjusted receivables increased by 231,335 to 1,151 million last week. Economists prefer the unadjusted number due to previous difficulties in adjusting the claims data for seasonal fluctuations due to the economic shock caused by the pandemic. Including a government-funded program for self-employed, gig workers, and others who don’t qualify for regular state unemployment programs, 1.4 million people applied last week.
Federal Reserve Chairman Jerome Powell said on Thursday the economy is far off from the US central bank’s inflation and employment targets. Powell said at a web symposium with Princeton University that it was too early for the Fed to talk about changing its monthly bond purchases, part of a series of measures it has implemented to help the economy.
Wall Street shares were trading higher. The dollar fell against a basket of currencies. US Treasury prices were lower.
MORE RIGOROUS MEASURES
The surge in claims last week likely also reflected people re-applying for benefits following the government’s renewal of a $ 300 unemployment supplement through March 14 as part of the latest stimulus package. Government-funded programs for self-employed, giant workers, and others who don’t qualify for state unemployment programs, as well as those who have run out of benefits, have also been extended.
“Not all people eligible for unemployment assistance actually apply for benefits, and the additional payments add an incentive to apply for benefits,” said Nancy Vanden Houten, chief US economist at Oxford Economics in New York.
Authorities in many states have banned indoor meals to slow the spread of the coronavirus. The economy lost jobs in December for the first time in eight months.
The Federal Reserve’s Beige Book Report on Anecdotal Information on Business Activity Collected from nationwide contacts in early January showed Wednesday that “contacts in the leisure and hospitality sectors have reported new job cuts due to tougher containment measures.”
The central bank also noted that the coronavirus resurgence was causing staff shortages in the manufacturing, construction and transportation sectors. The virus infected more than 22.5 million people in the United States and killed over 376,188, the majority of any country.
Although jobless claims fell from a record 6.867 million in March, remain above their peak of 665,000 during the 2007-09 Great Recession. Economists say it could take several years for the labor market to recover from the pandemic.
The claims report showed that the number of people receiving benefits after a first week of aid increased from 199,000 to 5.271 million during the week ending January 2. At least 18.4 million were on unemployment benefits across all programs as of late December.
Stress on the labor market could curb inflation amid signs of rising price pressures. On Thursday, the Department of Labor said in a separate report that import prices rose 0.9% in December after rising 0.2% in November. Import prices have been stimulated by the increase in energy prices and the recent weakness of the dollar.
Economists had predicted import prices, which exclude tariffs, to accelerate by 0.7% in December. In the 12 months to December, import prices fell 0.3% after dropping 1.0% in November.
“Prices are filtering higher, but with the labor market no longer improving, inflation is unlikely to affect the economy,” said Joel Naroff, chief economist at Naroff Economics in the Netherlands, Pennsylvania.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci