First-time jobless benefit claims processed since Covid-19 hit U.S. shores dipped below 1 million last week as companies continued to lay off workers at a slightly slower pace.
The Labor Department reported Thursday that 963,000 Americans filed for first-time jobless benefits in the week ended Aug. 8, down from a revised 1.186 million claims the week earlier. Economists polled by FactSet had been expecting claims of 1.15 million.
Continuing claims, which are the number of people not just filing but staying on unemployment benefits, came in at 15.486 million for the week ended Aug. 1, down from a revised 16.09 million the week before. The continuing claims numbers are reported with a one-week lag, but are considered a better gauge of the labor market.
While trending slightly lower in recent weeks, the numbers continue to reflect companies’ ongoing struggles to remain open, productive and in need of workers, particularly with the coronavirus’s resurgence in many regions across the country.
They also point to what economists and more recently Federal Reserve officials anticipate concerning the rebound in growth since March: that it is temporary, and additional flare-ups of Covid-19 potentially exacerbated by back-to-school and other plans next month could mean a second dip in economic activity, and in turn an increase in jobless benefit claims.
"It’s promising that initial unemployment claims (non-seasonally adjusted) have fallen, but there’s still a long road ahead," said Indeed Hiring Lab Economist AnnElizabeth Konkel. "The sheer magnitude of the claims five months into the crisis underscores how much coronavirus has battered the economy."
Indeed, while the U.S. economy added a better-than-expected 1.8 million jobs last month and the headline unemployment rate dipped slightly to 10.2%, the pace of hiring slowed – mainly from a surge in coronavirus infections and new business closures.
To be sure, billions in government funding to industries, companies and individuals have helped offset the blow that shuttering the U.S. economy for nearly two months might have otherwise had. Still, lawmakers have yet to cut another deal to release additional funds - something that has economists as well as Fed officials concerned in terms of the speed and progress of recovery.
Three different Fed policymakers voiced those concerns on Wednesday, noting that consumer spending in particular - the cornerstone of U.S. economic activity - will likely remain weak as people avoid in-person activities.
Speaking at an online event organized by the South Shore Chamber of Commerce in Massachusetts, San Francisco Fed president Mary Daly further warned about the impact of the expiration of the supplemental $600 weekly jobless benefit.
“It creates the potential for a hole, a little bit of a hole, in consumer demand and consumer spending,” Daly said. “We have evidence that suggests they were spending those resources to pay rent or to buy food or to buy other consumer goods.”
President Trump signed an executive action on Saturday that authorized states to extend a federally funded $300 in benefits and provide an extra $100 in state-funded benefits. States will likely not start implementing the supplemental benefits for weeks, as they must apply for the federal funds and set up new programs.
"The stalemate in Washington certainly looms large, and it’s unclear how long the market will tolerate the impasse," said Mike Loewengart, Managing Director, Investment Strategy with E*TRADE Financial. "It’s nothing short of impressive that the S&P flirts with record highs in just five months since the downturn, but it’s unknown if the disconnect between economic data and market activity will continue."
Even a breaking of that impasse isn't likely to do much for those who have already lost their jobs, said Indeed Hiring Lab's Konkel.
"The reality is that millions of people have lost their jobs, and with initial claims still 6.4 times higher than in the pre-Covid era, people are still losing them," she said. "The expiration of the expanded $600 federal unemployment benefit has only compounded the dire situation they face."