The weekly jobless claims report cements economists’ expectations for a third straight month of massive job losses in May and came a day after Federal Reserve Chair Powell warned of an ‘extended period’ of weak growth and stagnant incomes
Nearly 3 million laid-off workers applied for U.S. unemployment benefits last week as the coronavirus outbreak led more companies to slash jobs even though most states have begun to let some businesses reopen under certain restrictions.
Nearly 36.5 million people have now filed for jobless aid in the two months since the coronavirus first forced millions of businesses to close their doors and shrink their workforces, the Labor Department said Thursday.
The weekly jobless claims report, the most timely data on the economy’s health, cements economists’ expectations for a third straight month of massive job losses in May. The report came a day after Federal Reserve chair, Jerome Powell, warned of an “extended period” of weak growth and stagnant incomes.
By historical standards, though, the latest tally shows that the number of weekly jobless claims remains enormous, reflecting an economy that is sinking into a severe downturn. Last week’s pace of new applications for aid is still four times the record high that prevailed before the coronavirus struck hard in March.
Initial claims for state unemployment benefits totaled a seasonally adjusted 2.98 million for the week ended May 9, the Labor Department said. While that was down from 3.18 million in the prior week and marked the sixth straight weekly drop, claims remain astoundingly high.
Economists polled by Reuters had forecast applications for unemployment benefits totaling 2.5 million in the latest week. Claims have been gradually decreasing since hitting a record 6.87 million in the week ended March 28.
Though most nonessential businesses remain shut down, most states have begun to ease restrictions for some categories of retail establishments despite concerns that it may be too soon to do so without causing new infections.
Jobless workers in some states are still reporting difficulty applying for or receiving benefits. These include freelance, gig and self-employed workers, who became newly eligible for jobless aid this year.
The states that are now easing lockdowns are doing so in varied ways. Ohio has permitted warehouses, most offices, factories and construction companies to reopen, but restaurants and bars remain closed for indoor sit-down service.
A handful of states have gone further, including Georgia, which has opened barbershops, bowling alleys, tattoo parlors and gyms. South Carolina has reopened beach hotels, and Texas has reopened shopping malls.
Data from private firms suggest that some previously laid-off workers have started to return to small businesses in those states, though the number of applications for unemployment benefits remains high.
The latest jobless claims follow a devastating jobs report last week. The government said the unemployment rate soared to 14.7% in April, the highest rate since the Great Depression, and employers shed a stunning 20.5 million jobs. A decade’s worth of job growth was wiped out in a single month.
Even those figures failed to capture the full scale of the damage. The government said many workers in April were counted as employed but absent from work, but should have been counted as temporarily unemployed.
Millions of other laid-off workers didn’t look for a new job in April, likely discouraged by their prospects in a mostly shuttered economy, and weren’t included, either. If all those people had been counted as unemployed, the jobless rate would have reached nearly 24%.
Most economists have forecast that the official unemployment rate could hit 18% or higher in May before potentially declining by summer.
The job market’s collapse has occurred with dizzying speed. As recently as February, the unemployment rate was 3.5%, a half-century low. Employers had added jobs for a record nine and a half years. Even in March, unemployment was just 4.4%.
Now, with few Americans shopping, traveling, eating out or otherwise spending normally, economists are projecting that the gross domestic product (GDP) – the broadest gauge of economic activity – is shrinking in the April-June quarter at a roughly 40% annual rate. That would be the deepest quarterly contraction on record.
Few analysts expect a quick rebound. Fed Chair Powell warned Wednesday that the virus-induced recession could turn into a prolonged downturn that would erode workers’ skills and employment connections while bankrupting many small businesses.
Powell urged Congress and the White House to consider additional spending and tax measures to help small businesses and households avoid bankruptcy.
Powell spoke a day after House Speaker Nancy Pelosi, a California Democrat, proposed a $3 trillion aid package that would direct money to state and local governments, households and health care workers. Trump administration officials have countered that they want to first see how previous federal aid packages affect the economy. And, Republican leaders in Congress have expressed skepticism about approving significantly more spending right now.
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U.S. President Donald Trump is applauding the moves to reopen states’ economies in hopes of reducing unemployment. So far, there is limited evidence on how that is working.
“We are on the back end of the first wave of layoffs, but now we are transitioning from the natural-disaster phase to the recession phase,” said Josh Wright, chief economist at Wrightside Advisors in New York. “That’s why so many white-collar jobs are still being lost. We effectively amputated a large section of the economy, and we are going to limp along afterward.”
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