U.S. Jobless Claims Fall to Lowest Level Since Start of Coronavirus Pandemic -- 3rd Update
30 October 2020 - 12:58AM
Dow Jones News
By Josh Mitchell
The number of Americans filing initial claims for unemployment
insurance fell last week to the lowest level since the pandemic
began, suggesting layoffs are easing despite a rise in coronavirus
infections.
Initial jobless claims, a proxy for layoffs, fell by 40,000 to
751,000 in the week through Oct. 24, the Labor Department said
Thursday. That was the lowest level of claims since mid-March, just
before the pandemic shut down much business activity throughout the
U.S.
Daily virus infections reached new highs over the past week, and
it is too early to tell how employers and consumers will
respond.
Claims remain exceptionally high by historical standards. Last
week's new claims were more than three times the weekly average
early this year, before the pandemic. Initial claims, which reflect
the number of people laid off only recently and not those receiving
assistance for more than a week, are just one measure of
unemployment assistance. In total, more than 20 million Americans
are still receiving unemployment benefits through regular state and
emergency programs.
Anecdotal evidence -- companies big and small announcing plans
to lay off more workers as the pandemic persists -- suggests the
labor market recovery will be protracted.
"The fact that claims have significantly improved from the worst
parts of the crisis, while still extremely elevated at three times
that of pre-crisis levels, is a daunting reality that suggests
layoffs continue to ripple through the economy," Daniel Zhao,
senior economist for Glassdoor, said in a note to clients.
The biggest threat right now is a rise in infections. The
average number of new coronavirus cases reported daily over the
past week reached a new peak of 68,767 on Monday. States and cities
could impose new restrictions on businesses in response, as
European countries have done. Consumers could also hunker down
again, cutting back on travel, eating out and shopping.
"The easy gains have been had so far," said Brett Ryan, senior
U.S. economist at Deutsche Bank. "We don't think that you're going
to see the draconian shutdowns that you had at the beginning of the
pandemic. It's going to be much more localized, but that alone
keeps firms cautious."
Employers have been increasing their payrolls for months after
severe staffing cuts in the spring. They shed 22.2 million jobs in
March and April, during the worst of the shutdowns, and have added
11.4 million since then as restrictions eased.
But the monthly job gains have slowed since June. Employers
added 661,000 jobs in September, less than half the 1.5 million
added in August. The unemployment rate -- 7.9% in September --
remains more than twice as high as in February, when it tied a
50-year low of 3.5%.
More than half the economists responding to a Wall Street
Journal survey this month said they didn't expect the country to
claw back until 2023 or later all the jobs lost as a result of
coronavirus-related shutdowns.
The strong job growth over the summer largely reflected
businesses such as restaurants and hospitals staffing back up
quickly after being shut down for weeks.
Many businesses continue to operate below capacity. Many
restaurants, for example, have been serving diners only outside or
at half-capacity indoors to space out tables to comply with
social-distancing rules.
The labor market faces at least two other threats. One is cold
weather. Businesses moving indoors during the winter could risk
further spread of the virus, which could prompt additional
shutdowns.
The second is the expiration of enhanced unemployment benefits
that the Trump administration had put in place this summer to boost
the amount workers receive for unemployment compensation. When
those run out, consumers might cut spending, which could prompt
businesses to lay off workers.
Failed efforts by Congress and the White House to pass a new
federal relief package "will likely result in more small business
closures and state and local layoffs in the fourth quarter," David
Kelly, chief global strategist of JPMorgan Funds, said in a note to
clients this week.
"Most important, there continue to be wide swaths of the U.S.
economy which simply cannot get back to normal in a worsening
pandemic," Mr. Kelly said, "including travel, leisure,
entertainment, restaurants and bricks-and-mortar retailing."
Write to Josh Mitchell at joshua.mitchell@wsj.com
(END) Dow Jones Newswires
October 29, 2020 09:43 ET (13:43 GMT)
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