The number of Americans seeking unemployment benefits fell by 89,000 last week to a still-elevated 803,000, evidence that the job market remains under stress nine months after the coronavirus outbreak sent the U.S. economy into recession and lockdowns caused millions of layoffs.
The latest figure, released Wednesday by the Labor Department, shows that many employers are still cutting jobs as the pandemic and government business restrictions lead many consumers to stay home.
Though weekly jobless claims have dropped from a record 6.9 million in March, they remain above their 665,000 peak during the 2007-09 Great Recession.
Before the virus struck, applications typically numbered around 225,000 a week before skyrocketing in early spring when the virus – and efforts to contain it – flattened the economy.
Restaurant and bar owners, employees and union workers march in New York on Tuesday to protest a ban on indoor dining. Jobless claims remained high last week at 803,000
The total number of people who are receiving traditional state unemployment benefits fell to 5.3 million for the week that ended December 12 from a week earlier. That figure had peaked in early May at nearly 23 million.
The steady decline since then means that some unemployed Americans are finding work and no longer receiving aid. But it also indicates that many of the unemployed have used up their state benefits, which typically expire after six months.
Millions more jobless Americans are now collecting checks under two federal programs that were created in March to ease the economic pain inflicted by the pandemic. Those programs had been set to expire the day after Christmas.
On Monday, Congress agreed to extend them as part of a $900 billion pandemic rescue package.
On Tuesday night, though, President Donald Trump suddenly raised doubts about that aid and other federal money by attacking Congress’ rescue package as inadequate and suggesting that he might not sign it into law.
The United States is being battered by a new wave of coronavirus cases, with more than 18 million people infected and nearly 320,000 dead.
State and local governments have re-imposed restrictions on businesses, undercutting consumer spending and unleashing a fresh round of layoffs.
Initial jobless claims (top) and continuing claims (bottom) are seen in the charts above
A second report from the Commerce Department on Wednesday showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, declining 0.4% in November after increasing 0.3 in October. That was the first drop in consumer spending since the recovery started in May.
Economists had forecast consumer spending decreasing 0.2% in November. The economy plunged into recession in February.
The raft of weak data bolsters economists’ expectations for a significant slowdown economic growth in the fourth quarter and a potential contraction in output in the first three months of 2021, despite the stimulus and two vaccines to fight COVID-19 being distributed.
Though the new rescue package includes direct payments to most Americans, economists expect a chunk of the stimulus checks will be saved. Health experts also warn it could take a while for herd immunity.
‘The jury is out on whether consumers will spend the money they are given,’ said Chris Rupkey, chief economist at MUFG in New York. ‘It looks like much of the original economic impact payments were saved.’
The stimulus package also includes the extension of a weekly unemployment subsidy for another 11 weeks, and will expand a small-business lending program and steer money to schools, airlines, transit systems, and vaccine distribution.
Gross domestic product rebounded at a record 33.4% annualized rate in the third quarter after contracting at a 31.4% pace in the April-June period, the deepest since the government started keeping records in 1947.
Growth estimates for the fourth quarter are mostly below a 5% annualized rate. Economists expect modest growth or even a contraction in the first quarter of 2021.
‘Risks to the outlook are mostly negative,’ said Dante DeAntonio, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. ‘The increased spread of the virus across much of the country could result in an even larger pullback in business activity than expected.’