New unemployment claims remain high in the latest weekly report.
On Thursday there was fresh evidence of labor market fragility, underscoring the economic challenges facing the Biden administration and increasing pressure on a new wave of incentives from Washington.
The Department of Labor said 961,000 workers filed initial claims for state unemployment benefits last week. Seasonally adjusted, the new claims amounted to 900,000.
The numbers represent a decrease from the previous week, but remain extraordinarily high by historical standards and have recently returned to levels not seen since midsummer. In the comparable week a year before the pandemic, there were 282,000 initial applications.
“Unfortunately, the labor market started out with very little momentum in 2021,” said Greg Daco, chief US economist at Oxford Economics. “There has been no improvement and, if anything, there has been deterioration.”
New restrictions and lockdowns in a surge in cases in many parts of the country have decimated employment in the restaurant, leisure and entertainment industries with no relief in sight.
“The layoffs are very high and the virus is causing serious disruption,” said Rubeela Farooqi, chief economist of the US radio frequency economics. “It’s going to be pretty difficult in the next few months.”
The Labor Department reported earlier this month that employers cut the number of employees by 140,000 in December, the first decrease since the mass layoffs last spring.
The start of vaccinations in December sparked optimism about a quick turnaround, but the slow roll-out in many parts of the country has thrown those hopes back on track. On the flip side, the US $ 900 billion stimulus package passed last month and the prospect of more aid under the Biden administration have allayed fears of a double-dip recession.
Federal emergency programs expanded by recent legislation included Pandemic Unemployment Assistance, which helps freelancers, part-time workers and others who are not normally eligible for government unemployment benefits. A total of 424,000 new applications were submitted under the program last week, compared to 285,000 the previous week.
Mr Daco said uncertainty about the continuation of the program might have held claims late last year, so last week’s jump could represent late filings as well as the general weakness in the job market.
However, the pandemic unemployment benefits and a $ 300 weekly state and federal unemployment benefit allowance both expire in mid-March with no new legislative action.
Ms. Farooqi said there was no significant improvement in the economy until then. “More help is needed for households and businesses,” she said. “Many companies will close and many jobs will be lost without them. This poses a short-term downside risk for the economy. “
Overall, more vaccinations are the best choice for business, said Carl Tannenbaum, chief economist at Northern Trust in Chicago.
“There is no better economic incentive than a successful introduction of vaccines,” he said. “It will reduce the risk of human interaction and provide a foundation on which different types of businesses can open more permanently.”