US jobless claims remain high as 837,000 seek aid
WASHINGTON – While the number of Americans seeking unemployment benefits declined last week, the number of people seeking aid remained at a high of 837,000. Many see this as evidence that the economy is still struggling to sustain the shaky recovery that begin this summer.
A report released by the Labor Department’s Thursday posits that companies are continue to cut a historically high number of jobs. That said, weekly numbers have become less reliable as states have increased efforts to root out fraudulent claims and process earlier applications that have formed a backlog over the past few months.
California, as an example, accounts for more than one-quarter of the nation’s aid applications, simply provided the same figure it did the previous week. That’s due to the state’s moratorium on accepting new claims for two weeks so it can implement anti-fraud technology and address a backlog of 600,000 applications that are over three weeks old.
Overall aid has shrunk in recent weeks despite roughly 25 million Americans still relying on it. That loss of income is likely to weaken spending and continue to stymie any economic recovery in the coming months.
Those in need of jobless aid were previously entitled to a $600-a-week federal check that Congress approved in last spring’s economic aid package. That benefit expired at the end of July. The follow-up $300-a-week benefit implemented by President Trump via executive order lasted only through mid-September. Many are finding themselves without aid for the first time since this crisis began.
The result is that Americans’ spending and savings are slowing and declining. Total unemployment benefits fell by more than half in August, according to the Commerce Department. While consumer spending rose 1% in August, it was down from 1.5% in July. That increase, it is thought, relied in part on consumers drawing upon their savings.
“Unless employment growth picks up, or additional (government) aid is extended, consumer spending is at risk of slowing dramatically during the second phase of the recovery,” said Gregory Daco at Oxford Economics.
Other measures have been sending mixed signals. Consumer confidence climbed in September, driven by optimism among higher-income households, though it remains below pre-coronavirus levels. A measure of pending home sales rose in August to a new high, held there by ultra-low mortgage rates.
Yet some real-time indicators suggest that growth has lost momentum with the viral pandemic still squeezing many employers nearly seven months after it paralyzed the economy. An economic index put together by the Federal Reserve Bank of New York grew in September at a weaker pace than during the previous summer months.
Weekly applications for unemployment are sometimes viewed as a proxy for layoffs, although the data has become difficult to read in recent months. The flood of laid-off workers during the pandemic recession has overwhelmed state agencies and their ability to track that data has decreased.
The states’ efforts to clear backlogs and uncover fraud in the new program have made it harder to interpret the government’s report on unemployment benefits. Many economists no longer consider it a clear sign of the rate of layoffs.
Initial jobless claims remain above the highest levels reached in the 2008-2009 Great Recession. But last week, economists at Goldman Sachs noted that according to other data, layoffs have fallen below the peaks of a decade ago.
Still, many large companies continue to announce layoffs.
The Walt Disney Co. said this week that it’s cutting 28,000 jobs in California and Florida, a consequence of the damage it’s suffered from the viral outbreak and the shutdowns that were imposed as a response.
Allstate said it will shed 3,800 jobs — nearly 10% of its workforce. Tens of thousands of airline workers will lose their jobs this month as federal aid to the airlines expires. The airlines were barred from cutting jobs if they were receiving government assistance. Once that ends they will once again begin cutting jobs.
Late Wednesday, two of them — American and United — announced that they would begin to furlough 32,000 employees immediately after lawmakers and the White House failed to agree on a pandemic relief package that would extend the aid to airlines.
On Friday, the government will issue the jobs report for September, the final such report before Election Day, Nov. 3. Analysts have forecast that it will show a gain of 850,000, which would mark the third straight slowdown in job growth month over month. It would mean that the economy has regained just over half the 22 million jobs that were lost to the pandemic.