US weekly jobless claims jump on COVID-19, additional payments renewed

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In this news, we discuss the US weekly jobless claims jump on COVID-19, additional payments renewed

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WASHINGTON (Reuters) – The number of Americans filing for the first time unemployment benefits rose last week, confirming weakening labor market conditions as worsening COVID-19 pandemic disrupts restaurant and other business activities.

The larger than expected increase in weekly unemployment claims reported by the Labor Department on Thursday was seen by some economists as prompted by the recent renewal of supplementary unemployment benefits, but nevertheless raised the risk of further job losses in January after the drop in non-agricultural workforces. December for the first time in eight months.

A stalled labor market recovery could put pressure on the new Biden administration for a bigger relief package. Joe Biden will succeed President Donald Trump next Wednesday. He is expected to offer stimulus of up to $ 2 trillion on Thursday. The government approved nearly $ 900 billion in additional aid at the end of December.

“The economy clearly needs additional support from Washington, as right now rising jobless claims tell us that the labor market recovery has stalled and management is completely lowered, ”said Chris Rupkey, chief economist at MUFG in New York City.

Initial claims for state unemployment benefits increased from 181,000 to 965,000 seasonally adjusted for the week ended Jan. 9, the highest since late August. Economists polled by Reuters had forecast 795,000 candidates last week.

Unadjusted claims climbed from 231,335 to 1.151 million last week. Economists prefer the unadjusted number because of the earlier difficulties in adjusting loss data for seasonal fluctuations due to the economic shock caused by the pandemic. Including a government-funded program for the self-employed, on-demand workers and others who don’t qualify for the state’s regular unemployment programs, 1.4 million people filed claims last week.

Federal Reserve Chairman Jerome Powell said on Thursday the economy fell short of the US central bank’s inflation and employment targets. Powell told a web symposium with Princeton University that it was too early for the Fed to talk about changing its monthly bond purchases, as part of a package it rolled out to help the economy.

Wall Street stocks were trading higher. The dollar fell against a basket of currencies. US Treasury prices were lower.

STRONGER MEASURES

The surge in claims last week also likely reflected people who re-applied for benefits after the government renewed a $ 300 unemployment supplement until March 14 as part of the latest stimulus package. Government-funded programs for the self-employed, small workers and others who do not qualify for state unemployment programs as well as those who have exhausted their benefits have also been extended.

“Not all people eligible for unemployment assistance actually claim benefits, and the additional payments add an incentive to claim benefits,” said Nancy Vanden Houten, senior US economist at Oxford Economics in New York.

Authorities in many states have banned indoor dining to slow the spread of the coronavirus. The economy cut jobs in December for the first time in eight months.

The Federal Reserve’s Beige Book report with anecdotal information on business activity gathered from contacts across the country in early January showed Wednesday that “contacts in the leisure and hospitality sectors reported further reductions jobs due to stricter containment measures.

The central bank also noted that the resurgence of the coronavirus is causing staff shortages in manufacturing, construction and transportation. The virus has infected more than 22.5 million people in the United States and killed more than 376,188, most of all countries.

Although jobless claims fell from a record 6.867 million in March, they remain above their peak of 665,000 during the great recession of 2007-09. Economists estimate that the job market could take several years to recover from the pandemic.

The Compensation Claims Report showed that the number of people receiving benefits after a first week of assistance increased from 199,000 to 5.271 million in the week ending Jan. 2. At least 18.4 million were in unemployment benefits on all programs at the end of December.

Tensions in the labor market could dampen inflation amid signs of mounting price pressures. In another report released Thursday, the Labor Department said import prices jumped 0.9% in December after rising 0.2% in November. Import prices were boosted by higher prices for energy products and the recent weakness of the dollar.

Economists had forecast that import prices, excluding tariffs, would accelerate by 0.7% in December. In the 12 months ending in December, import prices fell 0.3% after falling 1.0% in November.

“Prices are filtering up, but with the labor market not improving any further, inflation should not affect the economy,” said Joel Naroff, chief economist at Naroff Economics in the Netherlands, Pennsylvania .

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

Original © Thomson Reuters

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