Jobless claims hit nearly 4-month high as coronavirus-triggers more layoffs

The numbers: New applications for U.S. unemployment benefits rose in mid-December to a nearly four-month high, pointing to rising layoffs and more damage to the economy from a record increase in coronavirus cases.

Initial jobless claims climbed to 885,000 in the seven days ended Dec. 12 from a revised 862,000 in the prior week, the Bureau of Labor Statistics said Thursday. It was the second increase in a row.

Economists polled by MarketWatch had forecast new claims to fall to a seasonally adjusted 818,000.

Another 455,037 applications for benefits were filed through a temporary federal-relief program that’s set to expire at the end of the year.

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 had fallen to a pandemic low of 711,000 in early November before the record wave of coronavirus cases hit full swing. Claims are now back to levels last seen in early September.

Initial claims rose sharply in Illinois and California, where the virus has surged and more government restrictions on business have been imposed. Most other states saw smaller increases or even outright declines.

It was not all bad news. The number of people receiving benefits through programs administered by the states, known as continuing jobless claims, fell by 273,000 to a seasonally adjusted 5.51 million in the week ended Dec. 5. That’s a new pandemic low.

Read: Americans stick near home again due to coronavirus resurgence in fresh blow to the economy

Yet part of the decline reflects more people shifting to a temporary federal program because they’ve exhausted state benefits, signaling a worrisome increase in long-term unemployment.

Continuing claims funded by a temporary federal program increased by an unadjusted 268,532 to 4.8 million in the week ended Nov. 21, the latest data available.

Applications for federal unemployment benefits have more than tripled since August because a large number of people have been unable to regain their old jobs or find new ones.

The number of people receiving benefits from eight separate state and federal programs, meanwhile, was reported at an unadjusted 20.65 million as of Nov. 28. The total increased by 1.6 million from the prior week, when it had dropped below 20 million for the first time since the spring.

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: The 245,000 new jobs added last month is smallest since U.S. recovery began in May

Big picture: The record rise in coronavirus cases has put another big dent in the economy, spurring consumers to cut spending and companies to pause hiring and investment.

Some businesses such as restaurants have even resorted to outright layoffs again because of fresh government limits on their operations.

Read: Retail sales sink 1.1% in November as COVID-19 slams restaurants and economy

The damage to the economy probably isn’t over, either. The coronavirus is still raging and it will take months for newly available vaccines to work their way through the broader population.

The good news is Washington appears on the verge of passing more federal aid for unemployed workers and struggling businesses after months of deadlock. The increase in jobless claims for the first time in months is adding pressure on lawmakers to strike a deal.

See: MarketWatch Coronavirus Recovery Tracker

What they are saying? “While hope is on the horizon as the coronavirus vaccine comes online, the labor market, for now, remains under a severe strain as Covid cases surge and restrictions on activity are put in place,” said lead U.S. economist Nancy Houten of Oxford Economics.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.43%

and S&P 500
SPX,
+0.51%

were set to open slightly higher in Thursday trades. Optimism that Washington will approve more federal aid.


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