Unemployment Claims Level Off as New Job Losses Offset by Hiring

By Eric Morath and Kim Mackrael

The number of workers seeking new unemployment benefits has plateaued at a historically high level, showing that many Americans are still losing their jobs amid a broadly healing labor market.

Weekly jobless benefit applications, historically a proxy for layoffs, have held between 1 million and 2 million since late May, and economists expect the figure will remain in that range again for the week ended July 4. The Labor Department will release fresh data at 8:30 a.m. ET on Thursday.

The level of new claims has eased from the 6.9 million peak touched in mid-March when the coronavirus pandemic and mandated businesses closures shut down wide swaths of the U.S. economy. But the recent levels are still well above the highest week on record before this year, which was 695,000 in 1982.

Thursday's report, however, may not give a clear view into the labor market. The Independence Day holiday, observed July 3, reduced the number of business days applicants had to file. It is not required for a worker to seek benefits the same week they are laid off. Also, the seasonally adjusted data tend to be volatile around major holidays, because the timing differs slightly from year to year.

The number of Americans receiving ongoing unemployment benefits has held near 20 million in recent weeks, down from a peak of nearly 25 million in early May, according to the Labor Department. The leveling of the numbers on unemployment rolls, also known as continuing claims, suggests new layoffs are being offset by hiring and recalling of workers.

Employers added a combined 7.5 million jobs in May and June after shedding 21 million jobs in March and April, separate Labor Department data showed.

Whether that recent rate of job creation, and relatively lower pace of layoffs, can continue is in doubt as coronavirus infections increased in several large states, including Texas and California, causing authorities to recalibrate reopening plans and creating renewed uncertainty for many businesses and consumers.

Alyssa D'Angola, a 35-year-old bartender in Austin, Texas, lost her job at the Golden Goose for a second time in late June when the state ordered bars to close to stem a resurgence in coronavirus cases. She had only been back at work for five weeks when the second closure began.

Ms. D'Angola said she was able to delay her mortgage payments beginning in the spring and is receiving unemployment benefits, including a $600 weekly top up from the federal government. That extra benefit is set to expire at the end of this month. "When all this stuff runs out, I don't know where I'm going to be," she said.

Many economists, including Bradley Hardy at American University in Washington, D.C., expect overall employment growth will continue, but at a significantly slower pace than over the past two months.

"When you see the rising number of cases," he said, "you have to ask to what degree will that tamp down foot traffic and spending, and ultimately employment."

Several large employers have signaled future pullbacks.

United Airlines Holdings Inc. told 36,000 employees, about half its U.S. workforce, on Wednesday that they could be furloughed from Oct. 1 because of the pandemic-driven slump in passenger demand. Clothing retailer Brooks Brothers, which filed for bankruptcy this week, has permanently closed 50 stores due to the pandemic. McDonald's Corp. and Apple Inc. are among the companies that have halted plans to reopen stores or announced new temporary closures.

Still, some businesses are seeing a marked pick up and are recalling workers this summer.

Geoff Wolpert, owner of the Peddler Steakhouse and the Park Grill restaurants in tourism hub Gatlinburg, Tenn., laid off 138 of his 147 employees in late March, when the restaurants temporarily closed. About two-thirds of those workers were able to apply for unemployment benefits, he said. Mr. Wolpert also emptied the restaurants' freezers, making 180 seven-day food boxes for staff members.

The two restaurants reopened a week apart in late May. "I'm going to want to remember those for the rest of my life," he said of the reopening days. All employees were recalled, though 16 chose not to return.

After reopening, sales at the restaurants were initially half the previous year's amount, but in recent weeks, revenue returned to the 2019 level, he said.

The bulk of hiring in recent months has come from businesses recalling workers to their former jobs, said Joaquin Alfredo-Angel Rubalcaba, an economist at the University of North Carolina. With all states at least partially lifting restrictions imposed this spring to limit the spread of Covid-19, he expects rehiring will contribute less to overall employment gains in the coming months.

Matching unemployed workers to new jobs will be a slower process, Mr. Rubalcaba said. Firms are likely to face increased costs for employee health benefits and unemployment insurance, and remain uncertain about the path of the economy, he said.

"We're attempting to confront a public-health crisis, but haven't been successful in doing that," Mr. Rubalcaba said. "That makes it hard to have a lot of confidence that the economy will continue to get better."

--Justin Baer contributed to this article.

Write to Eric Morath at [e-mail] and Kim Mackrael at [e-mail]