The numbers: The number of Americans who applied for jobless benefits soared in early January to a five-month high of nearly 1 million as more workers lost their jobs due to business closures and restrictions to combat the winter resurgence of the coronavirus pandemic.

Initial jobless claims filed traditionally through the states leaped by 181,000 to a seasonally adjusted 965,000 in the seven days ended Jan. 9, the government said Thursday. It was the highest level since August.

Economists surveyed by Dow Jones and the Wall Street Journal had forecast initial jobless claims to total 800,000.

Another 284,470 applications were filed through a temporary federal-relief program.

Adding up new state and federal claims, the government received 1.44 million applications last week, based on actual or unadjusted figures. Combined claims have yet to drop below 1 million a week since last spring.

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.

The Bureau of Labor Statistics is taking 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: Jobless claims inflated, GAO finds

Also: Why the inaccurate jobless claims report is still useful to investors

What happened: Last week applications for jobless benefits rose the most in the states of Illinois and Florida, accounting for the bulk of the increase. They also rose sharply in Kansas and California.

The record rise in coronavirus cases is the chief cause of the recent uptick in unemployment, but several other factors likely played a role.

For one thing, the federal government raised benefits at the end of 2020 by adding an extra $300 a week for unemployed workers. That may have induced more people to apply or reapply.

Read: When will jobless Americans get their extra $300 in benefits

Some companies also lay off temporary workers who were hired for the holidays, though it appears holiday hiring was much smaller because of the pandemic.

Whatever the case, the number of new jobless claims is disturbingly high. Before the pandemic, they were running in the low 200,000s and had never risen by more than 659,000 in any one week.

Meanwhile, the number of people already collecting state jobless benefits increased by 199,000 to a seasonally adjusted 5.07 million.

Another 4.2 million who’ve run out of state benefits have simply shifted to the temporary federal program because they can’t find work.

Altogether, the number of people receiving benefits from eight separate state and federal programs was reported at an unadjusted 18.4 million as of Dec. 26. That was down 744,511 from the prior week and marked the lowest level since the onset of the pandemic last spring.

Those numbers are also under dispute, though. The government’s more comprehensive monthly jobs report indicated a far smaller 10.7 million people were unemployed at the end of December.

Economists say the true number of unemployed is probably in the middle.

Big picture: Progress on reducing new jobless claims has backtracked in the past few months. They had fallen to a pandemic low of 711,000 in November before the resurgence in the coronavirus forced more businesses to close or cut back hours. That led the the first decline in employment in December since the early stages of the pandemic.

Read: The U.S. lost 140,000 jobs in December. How bad was it?

Economist warn many jobs could be lost permanently if the vaccines are slow to roll out or the pandemic lasts much longer. The extra financial aid from Washington will help, they say, but it can only do so much if Americans are too afraid to go out or government restrictions prevent them from doing so.

See: MarketWatch Coronavirus Recovery Tracker

What they are saying? “Another week of bad economic data underscores the fact that the economy is weak and the job market is getting worse,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.39%

and S&P 500
SPX,
+0.20%

rose in early in Thursday trades on the prospects of more government spending under the incoming Biden administration to prop up the economy.



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