Unemployment Claims Drop, but Holiday Week May Be a Factor
New claims for unemployment benefits dropped for the first time in three weeks, the government reported Thursday, but the economy remains under pressure as Covid-19 cases surge and fresh restrictions on businesses loom in some states.
The Thanksgiving holiday is likely to have delayed the filing of claims, and economists warn there will be more job losses ahead if the pandemic worsens.
“It’s still bad,” said Diane Swonk, chief economist at the accounting firm Grant Thornton in Chicago, noting that recent job losses were broad and concentrated in industries that were hit hard early in the pandemic: food services, health care, retail establishments and hotels.
Nearly 714,000 people filed initial claims for state unemployment insurance last week, compared with 836,000 the week before, the Labor Department reported. With seasonal swings factored in, last week’s total was 712,000.
“People don’t apply as much when there are holidays,” Ms. Swonk added. “There is a natural falloff that occurs, but we just don’t know how big it was.”
Ms. Swonk compared the effect to the drop in hospitalization data for the coronavirus that has been noted on Sundays and holidays. The Thanksgiving-related dip could be offset by belated claims when this week’s numbers are released.
Almost 289,000 new claims were tallied under the Pandemic Unemployment Assistance program, which provides support to freelancers, gig workers, the self-employed and others not ordinarily eligible for unemployment insurance.
Pandemic Unemployment Assistance is one of two emergency federal jobless benefit programs set to expire at the end of the month. Millions will be scrambling to make up for the lost aid, even as their reduced spending power dampens overall economic growth.
A new stimulus package has proved elusive on Capitol Hill because of a standoff over its size, though a compromise effort by a bipartisan group of legislators this week has provided some momentum.
The absence of additional aid has caused many economists to ratchet down their economic forecasts. Mike Gapen, chief U.S. economist at Barclays, sees virtually no growth in the first quarter of 2021, followed by a rebound as mass vaccinations begin and consumer behavior returns to normal.
Indeed, there are some hopeful indicators alongside the job market gloom: a booming stock market, brisk sales of new and existing homes, and reasonably healthy spending going into the holiday shopping season.
But until the pandemic is under control, those factors will be overwhelmed by official restrictions on businesses and reluctance to engage in activities like travel or indoor dining.
“I think the economy is on a solid footing, but we may just hit a couple of bumps between now and the end of the first quarter,” Mr. Gapen said. “Stimulus would be helpful, of course.”
To make matters worse, the surge in Covid-19 cases has brought on a wave of hospitalizations that threatens to overwhelm the health care system and force a return to the stay-at-home orders imposed last spring. California, for example, is considering another lockdown to stem the pandemic’s spread, a move that would have broad implications.
Already, other hard-hit states are seeing extensive layoffs. Illinois reported nearly 19,000 initial claims for unemployment insurance in the week ending Nov. 21, while Michigan said there were more than 17,000 filings. In both states, hotels and restaurants were among the most affected industries.
Joshua Shapiro, chief U.S. economist at the consulting firm MFR, noted that the highest weekly tally ever for jobless claims before the pandemic was 695,000 in 1982, well below last week’s total.
“The fact that more than eight months into the crisis initial claims are still running at such a high level is, in absolute terms, bad news,” he said in a note to clients. “Moreover, with the pandemic again worsening, it is likely that claims will remain quite elevated for some time to come.”
More clues to the economy’s trajectory are due Friday morning, when the Labor Department releases its monthly jobs report, which details hiring by employers as well as the ranks of the unemployed.
In October, employers added 638,000 jobs. The consensus estimate among Wall Street analysts surveyed by Bloomberg is that the November report will show 469,000 new jobs and that the unemployment rate will tick down to 6.8 percent from 6.9 percent.
But there is an extraordinary range of forecasts, with some economists predicting a gain comparable to October’s and others warning of a loss in the tens of thousands. Oxford Economics expects the report to show a net loss of 60,000 jobs, which would be the first decline since April, while Morgan Stanley Research has predicted an increase of 630,000.
One reason for the dissonance is that measures of the economy’s health have come in a conflicting and confusing rush.
“The barometers that economists use to anticipate the jobs report are all giving us different reads right now,” said Ernie Tedeschi, an economist at the accounting firm Evercore ISI. “We’re just not sure beforehand what data is going to be good at picking up the extraordinary circumstance of a pandemic during the holiday season and what data is not going to be good.”
Patricia Cohen contributed reporting.
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