Jobless Claims Hold at High Level as Recovery Navigates Covid-19 Surge

By Sarah Chaney Cambon

Jobless claims likely held at a high level last week as the U.S. economic recovery navigates a surge in new coronavirus cases and tighter restrictions on businesses in some states.

Economists expect unemployment claims ticked down to 733,000 last week from 742,000 a week earlier. Worker filings for unemployment insurance are down sharply from a peak of nearly seven million in late March. But they remain higher than in any previous recession -- the pre-pandemic peak was 695,000 in 1982 -- for records tracing back to 1967.

Claims filings can be more volatile around the holidays, due to workweek changes that can cause seasonal-adjustment anomalies. The four-week moving average, which smooths out weekly variation, has continued to move downward, indicating the labor market continues to regain lost ground, but at a slower pace than over the summer.

A nationwide surge in Covid-19 cases threatens to weigh on the labor-market recovery, as many states and localities impose new restrictions on businesses, though less stringent than the ones introduced in the spring, economists say. Further, the spread of the virus, combined with the onset of winter, is likely to send more consumers indoors and hamper spending and employment in industries like restaurants.

"Covid is driving the bus on the economy, and we're going to have some hairpin turns until we get to the nice, straight open road of the postvaccine world," said Constance Hunter, chief economist at KPMG LLP.

The U.S. economy continues to recover, albeit more slowly than when many businesses first reopened from lockdowns in late spring and early summer. Growth in retail sales and employment has cooled in recent months, government data show. Consumers' views toward the economic outlook soured at the beginning of November, according to the Conference Board, a private research group.

Still, the labor market has rebounded faster than many economists projected. The unemployment rate, at 6.9%, is down from April's post-World War II high of 14.7%. But recent real-time private-sector data point to a slowing job market. Growth in job postings has slowed across the U.S., according to job site ZipRecruiter. Small-business shutdowns and layoffs have increased in recent weeks, according to researchers at the University of Chicago, University of Illinois and University of California, Berkeley. They analyzed data for 40,000 small businesses that use Homebase, a scheduling-software company.

The number of people collecting unemployment benefits through regular state programs, which cover most workers, fell to 6.4 million for the week ended Nov. 7 from 6.8 million a week earlier, on a seasonally adjusted basis, according to the Labor Department. Continuing claims declined throughout the summer and into the fall, a sign many laid-off Americans returned to work.

However, some of the recent declines in continuing claims represent individuals who have exhausted the maximum duration of payments available through regular state programs, and are now collecting money through a federal program that provides an extra 13 weeks of benefits. About 4.4 million people were receiving aid through this extended-benefits program in the last week of October -- the largest number since the program began this spring, Labor Department data show.

Both the extended-benefits program and a program that provides benefits to those not typically eligible for jobless aid -- such as independent contractors and self-employed individuals -- will expire at the end of this year.

Jason Rossman, 41 years old, of Watertown, Mass., has been collecting unemployment benefits since he was furloughed this spring from his project-management job in the trade-show industry. He said jobless benefits, particularly the extra $600 a week that ended this summer, have helped cushion his finances. Meanwhile, he is only spending money on essentials like food and utilities and has stopped dining out at restaurants.

Though he isn't in dire financial straits, Mr. Rossman said he hopes to have a job by the time the federal extended-benefits program ends in December. He has been applying to project-management roles since his temporary layoff became permanent in early October. But he hasn't landed one job interview yet and feels his background in the hard-hit events industry is limiting his career prospects right now.

"I'm very pessimistic that I'm going to actually find anything any time soon," Mr. Rossman said. He hopes that as vaccines start to become widely distributed and travel picks up, the trade-show industry will bounce back so he can return to his former job.

Write to Sarah Chaney Cambon at [e-mail]

(END) Dow Jones Newswires

11-25-20 0544ET