US jobless claims rise despite economic reopening

Initial jobless claims in the US unexpectedly rose last week to their highest level in one month, even as states loosen Covid-19 restrictions on businesses.

The labour department on Thursday said there were 770,000 new applications for unemployment benefits, higher than the 725,000 claims reported the week before, according to seasonally adjusted figures. The report was weaker than anticipated, with economists forecasting 700,000 weekly claims.

About 282,000 people filed for aid through the Pandemic Unemployment Assistance programme, which provides benefits to the self-employed and others who would not qualify for regular benefits. That marked a decrease from the previous week’s 479,000 new claimants. PUA data are not seasonally adjusted.

Scott Murray, an economist at Nationwide, said the new wave of economic stimulus had added to optimism at a time when vaccinations and the end of some pandemic restrictions were encouraging businesses to hire workers. “Still, elevated joblessness shows that the labour market has many scars, and it could take years to heal fully,” he added.

Declining infection and hospitalisation rates, along with an expanding rollout of coronavirus vaccines, have prompted states to take further steps towards reopening their economies. Those moves have allowed businesses hit hard by the pandemic, such as restaurants, gyms and cinemas, to increase capacity in recent weeks. In some areas, there are no longer any statewide restrictions on businesses or social gatherings.

Economists have cautioned that a drop in unemployment claims in late February and early March was also fuelled in part by a blast of winter weather across the central US, particularly Texas, the country’s second-most populous state.

Claims in Texas increased last week, according to unadjusted preliminary figures. The pace of claims also picked up in Illinois, Indiana and Virginia.

Overall, the US has recorded 746,250 new jobless claims a week over the past month, down 16,000 from the previous week’s four-week average.

Continuing claims — the number of Americans actively collecting state jobless aid — held steady near 4.1m for the week that ended on March 6. However, the insured unemployment rate ticked higher to 3 per cent from 2.9 per cent.

Some of the decline in continuing claims can be attributed to unemployed workers exhausting regular benefits, economists have said. When combined, all state and federal unemployment programmes counted 18.2m people claiming benefits, according to unadjusted figures that are reported on a two-week delay.

President Joe Biden last week signed a $1.9tn stimulus bill, which included an extension to federally provided emergency unemployment aid and a third round of stimulus cheques.

The Federal Reserve estimated that the US economy would grow 6.5 per cent this year, which would be the fastest expansion since 1984, helped by the vaccine rollout and fiscal stimulus.

But the central bank signalled on Wednesday that it would hold interest rates near zero until at least 2024. Jay Powell, the Fed’s chair, said “no one should be complacent” about the economic rebound despite positive trends.

“We expect a significant improvement in the labour market over the course of 2021, with a total of 7m jobs recovered over the course of the year. Nonetheless, the elevated level of claims — still higher than the global financial crisis peak — underscores why the Fed will be extremely patient before making a policy change and not act pre-emptively,” analysts at Oxford Economics said.

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