Rising U.S. weekly jobless claims cast shadow on economic recovery

In this news, we discuss the Rising U.S. weekly jobless claims cast shadow on economic recovery.

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits rose unexpectedly last week, heightening fears that the COVID-19 pandemic would inflict lasting damage to the labor market.

The Labor Department’s weekly jobless claims report on Thursday, the most recent data on the health of the economy, also showed at least 25 million people were receiving unemployment benefits at the end of September, bolstering thus the view that the economic recovery from the recession was slowing down and in urgent need of another government bailout for businesses and the unemployed.

The weak labor market and the resulting economic hardship are major obstacles to President Donald Trump’s chances of securing a second term in the White House when Americans go to the polls on November 3. Former Vice President Joe Biden, Democratic Party candidate, blamed Trump for the administration’s handling of the coronavirus crisis for the worst economy in at least 73 years.

“The pace of economic recovery is slowing amid the ongoing pandemic,” said Andrew Chamberlain, chief economist at Glassdoor. “While the virus remains in control, today’s high claims cast a shadow over the fate of the US labor market over the next semester.”

Initial claims for state unemployment benefits increased from 53,000 to 898,000 seasonally adjusted for the week ended October 10. Data for the previous week has been revised to show 5,000 more claims received than previously.

Economists polled by Reuters had forecast 825,000 candidates last week.

Unadjusted claims increased from 76,670 to 885,885 last week. Economists prefer the unadjusted number of claims given previous difficulties in adjusting claims data for seasonal fluctuations due to the economic shock caused by the coronavirus crisis.

Including a government-funded program for the self-employed, small-scale workers and others who do not qualify for regular state unemployment programs, 1.3 million people filed claims last week.

US stocks opened lower. The dollar appreciated against a basket of currencies. US Treasury prices were higher.

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Graph: Unemployed claims

INCREASE IN PERMANENT UNEMPLOYMENT

Seven months after the start of the pandemic in the United States, first-time compensation claims remain well above their peak of 665,000 during the Great Recession of 2007-2009, although below the record high of 6.867 million in March. About 3.8 million people had lost their jobs permanently in September, and an additional 2.4 million unemployed for more than six months.

The claims report also showed that the number of people receiving benefits after a first week of aid fell from 1.165 million to 10.018 million in the week ending Oct. 3. benefits, which are limited to six months in most states.

About 2.8 million workers claimed extended unemployment benefits in the week ending September 26, up 818,054 from the previous week. It was the biggest weekly gain since the program started last spring.

As the White House and Congress struggle to agree on another bailout for businesses and the unemployed, demands are expected to remain high.

Tens of thousands of airline workers have been put on leave. State and local government budgets have been crushed by the pandemic, resulting in layoffs that are expected to escalate without help from the federal government.

High unemployment and a resurgence of new coronavirus cases across the United States threaten the economic recovery after a recession, which began in February.

Although economic activity rebounded in the third quarter on the back of the fiscal stimulus, stubbornly high jobless claims suggest that momentum has waned as the fourth quarter approaches.

GDP growth estimates for the third quarter exceed an annualized rate of 32%. The economy contracted at a rate of 31.4% in the second quarter, the deepest drop since the government began keeping records in 1947. Growth estimates for the fourth quarter have been reduced to a rate as low as 2.5% above a rate of 10%.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

Original © Thomson Reuters

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